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Unfortunately, disputes between franchisors and franchisees are common. Conflict may be the result of a misunderstanding of the terms of a franchise agreement, a franchisee’s failure to follow the stipulations in an operations manual, or if the franchisee has not paid what is due to the franchisor among other things.

As a franchisor, you may worry that any conflict will escalate into a civil breach of contract lawsuit, potentially costing a lot of money in litigation and negatively affect your franchise system. Thankfully, well-written franchise agreements often contain language that requires arbitration in the event of a dispute.

A North Carolina franchise arbitration lawyer can help franchisors draft franchise agreements that bind both parties to the arbitration. Seasoned franchise attorneys could be the ally you need to present your case and pursue victory in arbitration or even litigation.

Defining Arbitration Clauses in Franchise Agreements

An arbitration clause is a common part of many types of contracts. These provisions state that if a dispute arises between the two parties of an agreement, the parties must submit to binding arbitration to resolve their dispute. According to North Carolina Statute §1-569.6, an agreement to submit to arbitration in the course of any dispute is presumably valid, enforceable, and irrevocable. Signing a contract with a forced arbitration clause forfeits a party’s right to file a complaint in court.

Arbitration clauses may be effective tools for franchisors wishing to avoid costly and lengthy litigation with every dispute. A North Carolina franchise arbitration lawyer could help have any lawsuits filed against a franchisor dismissed if an arbitration clause is present in the franchisor’s franchise agreement.

What to Expect During Franchise Arbitration in North Carolina

All arbitration that occurs between franchisors and franchisees must follow the rules set forth by the particular arbitration administration organization that the parties agreed to in the contract.  Commonly, arbitration agreements reference the American Arbitration Association (“AAA”) or Judicial Arbitration and Mediation Services (“JAMS”). Arbitration is very similar to a trial with both parties retaining the right to appear with an attorney, submit evidence, call witnesses, and make arguments. However, there are key differences such as:

  • The lack of a jury
  • Partially relaxed rules of evidence
  • The ability of an arbitrator to dismiss the action or issue sanctions to a party
  • If a party does not appear, the arbitrator may rule against that party based on the evidence presented

While arbitration may take several months from start to finish, the parties have much more control over the dispute and how it is administered. After the hearing, the arbitrator will issue an order to the parties. This award can be any amount and can include injunctive aspects.

A Franchise Arbitration Attorney Could Guide You Through Arbitration

Arbitration clauses are a powerful way for franchisors to limit their exposure during a dispute with a franchisee. These clauses allow a franchisor to ask a court to dismiss any claim related to a franchise agreement and to have that court send the dispute to binding arbitration.

Arbitration clauses may be a helpful component in a franchise agreement and may save a franchisor a lot of time and money. A North Carolina franchise attorney could help franchisors draft agreements containing these clauses and advocate for them during the arbitration. Contact a North Carolina franchise arbitration attorney today to see if this type of dispute resolution is right for your business.