Mediation in franchise disputes

After attending a recent continuing education program, I am more convinced than ever that mediation is advantageous to both franchisees and franchisors for resolving many disputes, especially where a franchisee is claiming that disclosure was inadequate. Fighting battles through the courts is uncertain and risky, largely due to a wide scope for interpretation by the courts of the The Arthur Wishart Act (Franchise Disclosure) 2000(the “Act”).

On first reading of the Act, the requirement for franchisors to provide detailed disclosure to potential franchisees appears to be a simply worded and straightforward attempt to protect franchisees from notoriously one-sided franchise agreements. But on a closer look, the Act is somewhat vague, opening the door for judicial interpretation in regards to the franchisors’ disclosure obligation and the franchisees right to rescission for insufficient disclosure. In this article, I will outline the basic disclosure requirements and potential costs to franchisors in the event that a franchisee is successful in satisfying a court that disclosure was inadequate.