How best to resolve serious disputes between franchiser and franchisee remains a matter of, well, disagreement.
Which is preferable, judge and jury or arbitrator? Those favoring arbitration contend it is faster than court litigation. Others say that the finality of an arbitrator’s decision – the loser is stuck with it – makes it a riskier path than the courts and their appeal process. There’s also disagreement over which course is cheaper.
Spurred by anecdotal evidence that arbitration has been losing its luster, two researchers say that’s apparently not the case.
After examining dozens of franchise contracts for 1999 and 2007, their study found that in both years about 44% of the contracts contained provisions for arbitration. Some contracts had no conflict resolution clauses.
“The default rule governing the resolution of disputes is litigation. If the contract is silent on how disputes are to be resolved, the parties may go to court,” noted the researchers, University of Kansas law professor Christopher Drahozal and Quentin Wittrock, a principal with the Minneapolis law firm of Gray Plant Mooty. Their work appears in the current quarterly edition of the Hofstra University Law Review. Full article.