What to do when your restaurant chain finds itself in a dispute

By Victoria Davidson

Conflict, unfortunately, is a part of life and when you are in business it can seem that it is a part of every day.

There is a saying in legal circles, that in times of economic prosperity the M&A lawyers are busy and when times are tough, it’s the litigators who are working long hours. Right now, as we swing from uncertainty to the “new normal”, the pressure on businesses, especially in the QSR industry, is intense.

We are seeing a disparity in where customers are spending their money and how the increased reliance on meal delivery services have seen some in the industry flourishing while others struggle and may continue to struggle even as restrictions ease. And when there is financial pressure, tensions can escalate. What in normal circumstances could be dealt with quickly and relatively easily can become a bigger and more fraught issue when finances are tight and trading conditions uncertain.

Relationships matter in business and, just like the customer relationship, business to business relationships can be significantly affected by a bad experience. Contentious negotiations over much needed rent relief with a landlord can leave the tenant with the impression that their years of timely rent payment and good conduct amounts to little. When a long-term supplier suddenly changes trading terms, causing an impact on cash flow, it can cause undue stress and may lead to looking for a new supplier.

However, most often it is not practical or even financially prudent to terminate a relationship that is causing stress. To exercise the termination provisions in the contract, restaurant operators have to be sure the other party is in breach, or they can find yourself with a wrongful termination claim on your hands.

And there are relationships that cannot be easily walked away from. Some disputes have to be worked through and the relationship has to continue. In those instances in particular, the need for a constructive and mutually agreed resolution to the conflict is absolutely necessary. If the underlying issues of the dispute are not fully addressed, the relationship will always be at risk of coming into conflict again.

This is where mediation comes in. Mediation offers a pathway through even the most fraught conflict and can provide an outcome, negotiated by those involved, specific to their needs. The mediation model gives participants the space to address their interests and explore all their concerns. By doing this often difficult process, it becomes clearer and easier for them to design a tailor-made solution they can be satisfied with and as a result, comply with. And the relationship can be maintained.

While mediation is a part of the Franchise Code of Conduct and is a mandatory requirement in all franchise agreements, it should not be confined to only addressing disputes between franchisees and franchisors. The mediation process is ideally suited to resolve issues between parties who need and want to maintain a relationship, especially where participants are restricted with time and financial pressures.

If you are interested in more information about the mediation process or require a mediator, please contact Victoria Davidson at vad.mediation@gmail.com

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