Entering into a franchise agreement is an exciting time. The promise of what is ahead with commercial returns for both the franchisor and franchisee leading both parties to enter into the relationship on an understandably enthusiastic basis. 

From such a positive start, the dynamics can change as the business relationship unfolds with disputes surrounding the following areas high on the agenda:-

The Franchise Agreement

As with any business there are always risks. Taking on a franchise is like any other business and whilst it may be of benefit to have a brand that is already established, there can still be challenges. 

Franchising itself is not regulated in the UK and as a result there are no regulations to guide both parties, meaning that any company can set up as a franchisor.

The most common type of franchise dispute is misrepresentation. This arises when the franchisee alleges that the franchisor was misleading with information or documentation provided to encourage them to enter into the franchise agreement. 

The franchisee has to show that in entering into the franchise agreement they relied upon statements of fact presented to them by the franchisor which later proved to be untrue or could not have been reasonably held.  Perhaps understandably in this category, those claims tend to focus on financial projections relating to the financial returns of operating the business and its running costs and expenses.

The franchise agreement itself can be drafted in a way to favour the franchisor with many obligations falling on the franchisee including a personal liability if the franchisee does not deliver on certain performance or financial requirements. Ensuring that the franchise agreement has been properly drafted and that the parties were aware of their own rights and obligations is critical, as it will enable both parties to operate their part of the agreement effectively and efficiently.

Preparing well in advance for managing the franchisee will assist the franchisor to support this new extension of its existing business.  The program of engaging with the start-up franchise from the outset through to being up and running is important and can head off any potential areas of conflict. This means ensuring that the right levels of support and training are in place.

Handling disputes

The majority of franchise agreements will include a clause as to how disputes between the parties should be handled. This is the first point of call if communication between the parties has broken down.

Mediation can be part of that process, or other facilitated face-to-face meetings, if both parties are represented by solicitors and their direct communications have been unsuccessful. Arbitration or litigation can lead to an assessed outcome for the parties however this can be lengthy and expensive.  Many court cases can take up to 2 years if they exceed small claims limit of £10,000 which makes mediation and its ability to resolve a dispute within a day at much less cost an attractive alternative.

Franklins Solicitors LLP have assisted many franchises in the following areas and just some examples are set out below:-

Following an assessment of the legal position, we discuss with you the options and then best strategic approach in your dispute.

If you have the franchise dispute or have issues with a franchise oral franchisee relationship, please our Dispute Resolution team on 01604 828282 / 01908 660966 or email Litigation@franklins-sols.co.uk.

The Small Claims Track is used for lower value claims, such as debt recovery claims or contract disputes valued at less than £10,000 and is intended to be a more “user friendly” process. This means that many Claimants and Defendants alike are able to take conduct of the matter themselves as a ‘Litigant in Person’, rather than being formally represented.

However, Court proceedings can often be daunting for those involved and it is important that deadlines and key dates are met to avoid detriment to your claim or Judgment being made against you. This article therefore aims to set out key features of the process and any final Hearing.

So what does a claim in the Small Claims Track involve?

The process

  1. Before a claim is commenced, the Pre-Action Protocol should be followed and an initial Letter of Claim sent to the Defendant;
  2. If the Defendant’s co-operation is not forthcoming or the parties are otherwise unable to resolve the matter, the Claimant may proceed to file a claim in the County Court;
  3. Once the Claim Form and Particulars of Claim have been filed with the Court and subsequently issued and served upon the Defendant, the Defendant will then have 14 days to file an Acknowledgment of Service;
  4. If no Acknowledgment of Service is filed within this timeframe, the Claimant may apply to the Court for Judgment in Default against the Defendant for the full amount claimed;
  5. If an Acknowledgment of Service is filed, the Defendant will then have a further 14 days to formally respond to the Claim with any alleged Defence;
  6. Once the Defence has been filed with the Court, the parties will be sent a Directions Questionnaire by the Court. The questionnaire contains information such as availability for a Hearing, whether the parties are willing to engage in Small Claims Mediation and details of any witnesses. The parties must both complete and return the Questionnaire by the date specified by the Court;
  7. Once the Directions Questionnaires have been filed, the Court will then decide whether to allocate the matter to the Small Claims Track and whether a Hearing is required and if so, will issue a Notice of Hearing providing confirmation of the Hearing date, the date upon which the Claimant must pay the Hearing fee and any special directions to be followed by the parties beforehand;
  8. Unless otherwise specified by the Court, standard practice is for the parties to file and serve their written evidence with the Court in a compliant format no later than 14 days before the Hearing date;
  9. The evidence and documentation supplied by both parties will then be considered by the Judge at the Hearing in order for Judgment to be made.

The Hearing

The Hearing itself will be more informal than those in superior tracks and not at all as daunting or intimidating as often portrayed in TV dramas!

Usually the Hearing will be heard in one of the Judge’s rooms or one of the smaller Courtrooms.  Whilst they are usually open to the public, in practice it is uncommon for anyone other than the parties, witnesses and representatives to attend.

The Judge will have flexibility as to how to conduct the Hearing and will usually have read each party’s evidence and papers before the Hearing begins. The Judge will tend to ask each party to summarise their case in turn and then raise any queries they may have with either party. If either party has any comments or queries with the opposition, often the Judge will allow these to be expressed providing this is done in a reasonable and controlled manner.

Should you have representation?

Because claims allocated to the Small Claims Track are lower value, there are often issues of proportionality in instructing Solicitors to act on your behalf throughout the process. This is particularly so in defended claims and is important to bear in mind because costs recovery is extremely limited in Small Claims matters – even if you are successful.

To assist with this, our Dispute Resolution Team are able to offer a fixed fee consultation service to discuss your matter and provide you with guidance as to the next steps and what to expect moving forward.

If you are a Claimant or Defendant in a Small Claims matter please do not hesitate to contact our Dispute Resolution Team on 01604 828282 / 01908 660966 or email Litigation@franklins-sols.co.uk for details of our fixed fee services.

Adjudications are a quick method of resolving construction disputes and enabling the parties to move on with a continuing project, or simply put the past behind them and focus upon new projects. They are however occasionally challenged when one of the parties believe that the law has not been properly applied to the circumstances. As the way of challenging or enforcing the decision is through the Court system, it is open for the parties to consider their options in settling for the outcome reached or opening an issue up to further scrutiny of a Judge in the Court setting.

In Willow v MTD Contractors 2019 EWHC 1591, the Court allowed severance of part of an Adjudicator’s Decision. Ordinarily, a Court would enforce an Adjudicator’s decision even if the decision was wrong, provided that an Adjudicator acted in accordance with the rules of natural justice and acted within the Adjudicator’s jurisdiction. With a couple of exceptions to this rule, it has been possible for this to be relied upon quite freely. This rule had therefore deterred many from challenging Decisions reached on the basis that even if wrong, the Court was likely to uphold the overall Decision.

In allowing the severance in Willow, the Court acknowledged that the part containing the flaw could safely be severed without affecting the other parts of the Adjudicator’s Decision. By removing the offending part, the balance of the Decision still fulfilled the above criteria and was appropriate.

There have been a number of cases where the Technology and Construction Court (TCC) has warned parties not to issue challenges to the enforcement of an Adjudicator’s decision; so the Court’s indication that the TCC should be more willing to order severance of an Adjudicator’s decision following this particular case was a shift in emphasis and serves to play a part in a party’s decision on whether to take a matter forward to Court for review if they are unhappy with an Adjudicator’s decision.

If you are looking for advice regarding a dispute, contact our Dispute Resolution Team today on 01604 828282 / 01908 660966 or at litigation@franklins-sols.co.uk.

Yes, it seems so.

Recently the International Chamber of Commerce (“ICC”) released its statistics on Arbitration cases for the past 12 months. The results showed that in 2018, 842 new cases were registered with the ICC, involving 2282 parties from 135 countries and territories. The increase in the number of parties seeking Arbitration reflects the general trend reported by many of the other Arbitration institutions.

Arbitration image with chess pieces

The statistics also showed increasing diversity in parties and arbitrators. Just under 41% of all parties to disputes filed with the ICC are based in Europe. Gender diversity of the arbitrators is now being published by some of the Institutions with the ICC confirming that 18.4% of confirmed appointments in 2018 were women.

Many disputes revert to Arbitration due to a contractual obligation to do so. Without such an agreed contract clause, the three popular means of resolving a commercial dispute remain litigation through the Courts, arbitration and mediation.

Time is considered a negative factor of litigation through the Court with the process often being criticised for taking years to complete. The average duration of ICC cases from start through to final award in 2018 was reported to be two years and four months. An award is the Arbitration Tribunal’s equivalent of the Court’s judgment. It is difficult to draw direct comparisons as with every arbitration there are occasions when the parties agreed to suspend and stay the process due to the flexibility that this type of forum offers. To expedite awards however, the ICC is seeking to limit any delays by offering expedited procedures to incentivise Arbitrators to draft their reward decision quickly post hearing. These measures allow the ICC to reduce Arbitrator’s fees when awards are not submitted within two months by a single Arbitrator or within three months by a three-member Arbitration Panel.

It is perhaps encouraging for some to note that the ICC has classified “younger” Arbitrators as those under the age of fifty and that younger Arbitrators made up 35% of the Arbitrators appointed in 2018.

If you have a contract dispute and your contract contains an arbitration clause, we can help.

For further advice and assistance please contact our Private Client Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk