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National Franchise Mediation Program
An Option to Litigation

WHAT IS MEDIATION?

• Mediation is a nonbinding form of negotiation facilitated by a professional neutral third party, the mediator. In mediation, the mediator holds a series of joint sessions and separate caucuses with the parties in an effort to assist them in reaching an agreement. It is a less costly and less time-consuming process than litigation, which can foster a stronger partnership between the parties rather than an adversarial standoff between attorneys.
• Entering into a mediation process is essentially without risk. There is no agreement unless both parties agree. Furthermore, all other dispute resolution options remain open in the event the parties do not reach agreement. No one gives up any rights: after mediation, the disputing parties can proceed to arbitration or to litigation.
• In fact, failure is the exception. Through Dec. 31, 2003, a success rate of approximately 80 percent was achieved in cases where the franchisee agreed to participate, with many cases resolved after filing for mediation but without the intervention of a mediator.

BENEFITS OF MEDIATION

• Mediation is results-oriented.
• Mediation allows each side to state its positions relative to the merits of the case and its views regarding the perceived rights and wrongs of past conduct. Therefore, both sides have an opportunity to evaluate each other's positions, often learning new information, as they begin to focus on settlement options.
• Armed with such information, a skillful mediator is often able to identify hidden interests and settlement alternatives that may not be apparent in conventional negotiation or allowed in traditional litigation.
• Mediation is less costly and less adversarial than litigation.
• Mediation allows involved parties to reach a mutually agreeable solution rather than have a decision dictated by the court or an arbitrator. The parties control the process and the outcome.
• All proceedings and decisions are confidential.

HOW THE PROGRAM WORKS

Assuming all parties agree to mediate:

• The mediation procedure process is initiated by the disputant sending a "dispute letter" to the other side and to the CPR Institute for Dispute Resolution (CPR).
• The first step after sending a dispute letter is for the parties to attempt to resolve their differences through negotiations between senior representatives without third-party involvement.
• Unless CPR is notified by the disputing party within 20 days that negotiations were successful, CPR will proceed to the next step: providing the parties with five options for mediators located in the franchisee's region .
• Once a mediator is selected, parties are asked to submit key documents to assist the mediator in understanding the issues and the chronology involved in the dispute.
• A location is chosen in the same geographic region of the franchisee.
• If a joint session begins the mediation, it is usually followed by separate meetings with the parties called caucuses in which he or she explains the process and hears short presentations for each side. Like all aspects of the mediation session, private caucuses are confidential.
• The confidentiality agreement governing the mediation will be explained and signed by all parties at the commencement of the mediation.
• During possible subsequent meetings — both joint and separate — the mediator may assist the parties in generating ideas/solutions.
• When both involved parties reach an agreement, the mediator, the disputing parties or other designee records the terms. If an agreement cannot be reached, the mediator will assist the parties in reaching a partial agreement and/or suggest other dispute resolution options per the guidelines of the AAHOA process.

COST

The mediator's compensation, administration fees and sundry costs are determined before the appointment, and both involved parties will share the costs equally.

ROLE OF THE MEDIATOR

The mediator, skilled in sophisticated communication and negotiation techniques, assists the parties in negotiations in important ways such as:

• Working to improve communication among the parties;
• Helping each party clarify its own underlying interests and concerns;
• Exploring the consequences of not reaching agreement;
• Generating options for mutually agreeable resolution of the dispute.

ROLE OF THE INVOLVED PARTIES

Decision-makers from each side must be present at the mediation or it will not go forward. Any exceptions must be by agreement and in conference with the selected mediator. In mediation, understanding is best promoted when business executives or managers take an active role in the mediation and explain their positions directly to their counterparts, rather than communicating indirectly through surrogates. These executives have the best understanding of their company's interests and are the most likely to embrace creative, business-oriented solutions. Counsel to the parties, who may be in-house or outside lawyers, also have important roles, namely to:

• Counsel on the advisability of settlement and mediation prior to and during the process;
• Persuade parties to agree to the mediation process;
• Educate the client representative about the legal issues;
• Try contractual issues;
• Draft statements for submission to the mediator;
• Prepare for an effective presentation;
• Serve as a sounding board for the client to discuss settlement options as the mediation progresses;
• Assure confidentiality of the proceeding and avoid adverse consequences to the client's litigation position should the mediation fail;
• Draft the settlement agreement and assure its enforceability.

HOW TO PARTICIPATE

• To initiate a mediation procedure, send a dispute letter to the franchisor and a copy to The CPR Institute for Dispute Resolution (CPR).
• Speak with your franchisor and make a good faith effort to resolve your dispute. Inform CPR of the outcome.
• If CPR is not notified that a resolution has been reached within 20 business days of receiving the dispute letter, CPR will begin selecting possible potential mediators.
• Within five (5) additional days (25 total), CPR will submit five (5) mediator candidates from AAHOA's list to both parties.
• If parties are unable to agree upon a mediator, each will give their preferences to CPR by ranking the candidates from one (1) to five (5) (with one (1) indicating the first choice and five (5) indicating the last). The candidate with the lowest combined score will be chosen by CPR.
• For information on the rest of the process, please see "How the Program Works" at the top of this page.

RECOGNIZED HOSPITALITY INDUSTRY MEDIATORS

These mediators form a sub-committee of the CPR Franchise Panel of Neutrals in order to help AAHOA members with mediation rather than litigation. Click on the Web site link below, for a list of sub-panel of hospitality mediators. An "H" next to an individual's name designates hospitality experience. The list will grow as more mediators with hospitality experience are credentialed.

     http://www.franchisemediation.org/industry_franmedprog-panel.htm

MORE INFORMATION

For more information, contact the AAHOA office.