The answer is a definite yes… and no!
While I can cite no hard evidence, in my experience I find that 50% of strained franchise relationships can be salvaged by mediation. The prospect for success would be greater but for poor management, heightened emotions and a case of terminal stubbornness present on both sides of the dispute. Still, I recommend mediation to my clients because at least it gives the parties that 50/50 chance of salvaging the relationship and moving forward together.
Since I like mediation, and encourage it in resolving franchisor/franchisee disputes, the overriding question is: "How can a seemingly solid relationship be allowed to deteriorate to a point of no return in the first place?" Answer: It usually stems from the preconceptions and attitudes of the parties.
Successful franchisors must be excellent leaders, executives, communicators, motivators and managers. That’s a hard combination to come by, especially in the early stages of a company’s franchising. On the other side franchisees need to communicate, listen and be flexible by objectively evaluating possible solutions without a lot of emotion. That’s hard to do when your money, your life and your passion is directly affected by each decision of the franchisor.
Litigation and Arbitration lessen likelihood of success
If a dispute goes to arbitration or litigation my experience is that any future relationship is most probably unsalvageable. I was an arbitrator for the American Arbitration Association in franchise disputes and I never once saw a positive outcome. Yes, there were technical “winners” and “losers”, but in reality I think all parties were losers. I was on the board of one franchisor that “won” in arbitration – if you want to call years of hearings, hundreds of thousands of dollars in legal fees and the loss of a major regional developer winning.
The take-away here is: The relationship of franchisor and franchisee is a delicate one, can never be arbitrarily one-sided, and needs to be valued and nurtured by both partners to gain long-term success.