The Pros & Cons: Mediation vs. Litigation

By Steven Belmonte CEO, Vimana Franchise Systems LLC | April 01, 2012

If you feel limited as to your options in negotiations with franchise companies, there's new hope. Third-party mediation and negotiation services are available to licensees to help them avoid costly litigation. Hospitality experts who once walked-the-walk and talked-the-talk of a franchisor can use their experience to help licensees negotiate out of those agreements. Steve Belmonte explains the pros and cons of mediation and litigation, and why mediation is most likely the best solution for your franchise needs. Not only is it better cost-wise, but there is a high percentage rate of success for both parties.

There is a sizeable new wave of advocacy for mediation that is beginning to build within our industry. The reason is because mediation is probably the closest thing to a "no-brainer" alternative to litigation in many years.

Why? Because litigation is very expensive, arduous and time consuming, and it puts a lot of stress on all parties involved. Likewise, litigation doesn't focus on settlement or resolution. It focuses on deciding which side is right or wrong. Therefore, any settlement is a byproduct of litigation.

Mediation, on the other hand, is inexpensive, and disputes are oftentimes resolved in one or two days, not one or two years, with a high percentage rate of success for both parties. Let me expand on that.

All too often, franchise contract disputes cannot be resolved in meetings between the two parties, and then one or both make the decision to hire legal counsel in order to get the matter straightened out. Suddenly, what was a two-entity partnership now becomes four entities as legal teams from each side set their sites on resolving the case for the betterment of their respective client, but also improving the bottom lines financially of their respective law firms. So what's the alternative? The answer is mediation.

Mediation is an informal, non-binding negotiation process through which an impartial third party tries to get the disputing parties to reach a settlement. The mediator's role is to isolate disputed issues, develop options or consider alternate solutions, and encourage the parties to reach a settlement accommodating the needs of the parties. The mediator isn't a judge and has no authority to impose settlement terms. The mediator's role and the goal of the process are to help the parties achieve their own resolution. There are two very important advantages to mediation. First, there is a considerable cost savings. Legal fees and other litigation expenses are not showing any signs of diminishing. Second, there is a considerable saving of time. While I am not advocating that attorneys are not needed, the red tape associated with litigation could potentially extend over the course of six months to a year, if not longer with attorney's fees topping out at $25,000 to $40,000. Depending on the mediator, a dispute could potentially be resolved in one to two days and cost a small fraction of what you would pay an attorney.

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