Most franchise contracts once called for mandatory arbitration of issues, rather than going to court. But these days there is growing pressure -- from franchisees, judges, Congress and even some franchisers -- to rethink that longstanding arrangement.
"The trend toward arbitration has pretty much ended," says Peter Lagarias, a franchisees' attorney in San Rafael, Calif.
Among the concerns is that there is no guaranteed right of appeal. "You have to take what the arbitrator decides," says Joshua Becker, an in-house counsel for fast-food franchiser Kahala Corp. For that reason, he says, Kahala, whose brands include Blimpie submarine sandwiches and TacoTime, favors resolving issues with franchisees in court.
Why am I laughing? Because my friend Charlie Berwanger (whose firm, I just noticed, recently opened a Chicago office) and I wrote an article titled "Arbitration in the 1990s - Absolute Power Corrupts Absolutely and an Appealing Solution" back in...oh...1995? It basically made all of the same points, thirteen years ago. I guess it is always nice to be ahead of the curve.