Nationwide Franchise Assistance for Hotel Owners
Dispute Resolution Through Franchise Mediation Brings Hospitality To Higher Levels
By Steve Belmonte
In 2002, Mahesh (Mike) Amin, chairman at that time of the Asian American Hotel Owners Assn. and a third-generation hotelier from California who serves as president of The Amin Group, said he believed that “mediation is one of the many opportunities the association planed to evaluate as a potentially viable and desirable alternative method for dispute resolution.”
Today, AAHOA is a strong advocate of formal mediation practices. I personally have seen a dramatic increase in the use of mediation services from members of this growing and highly respected group – over the last 15 months I have successfully settled 100 liquidated damage claims through mediation for Asian American hotel owners.
What this tells me – and the hospitality industry – is that mediation works and both parties win. It’s the quickest and most affordable means of alternative dispute resolution available to the industry today – and if both parties walk away from the table satisfied, then why not utilize it?
While Mike Amin served as chairman of AAHOA, he often discussed and wrote about the topic of mediation in the hospitality news. He said: “When both sides share risk, share success and yes, share loss … when both sides are involved in the decision-making process … when we all sit at the table and are heard … only then will we be able to cultivate a truly healthy franchise system.”
I commend Mike Amin and AAHOA President Fred Schwartz for their foresight and for helping to set the groundwork to improve the dialogue between franchisors and franchisees by embracing concerns that affect both sides, including impact policies and territorial protection, marketing and operational support, quality scores and lack-of-performance policies.
This is not to infer that the problem in these matters has anything at all to do with devious franchise companies. While all of them are in the business of making money, none would survive for very long if they engaged in practices that are dishonest, unfair or morally bankrupt. So, it is clear that the problem is not that franchise companies are out to cheat potential and current franchisees. Precisely, the problem is that the franchise agreement is an intricate document designed to deal with as many situations as possible in favor of the side that draws up the contract—namely, the franchise company.
All too often, franchise contract disputes cannot be resolved in meetings between the two parties, and then one or both make the decision to hire legal counsel in order to get the matter straightened out. Suddenly what was a two-entity partnership now becomes four entities as legal teams from each side set their sites on resolving the case for the betterment of their respective client, but also improving the bottom lines financially of their respective law firms.
What’s the alternative? Mediation.
What is mediation?
Mediation is an informal, non-binding negotiation process through which an impartial third party tries to get the disputing parties to reach a settlement. The mediator's role is to isolate disputed issues, develop options or consider alternate solutions, and encourage the parties to reach a settlement accommodating the needs of the parties. The mediator isn't a judge and has no authority to impose settlement terms. The mediator's role and the goal of the process are to help the parties achieve their own resolution.
There are two very important advantages to mediation. First, there is a considerable cost savings. Legal fees and other litigation expenses are not showing any signs of diminishing. Second, there is a considerable saving of time. While I am not advocating that attorneys are not needed, the red tape associated with litigation could potentially extend over the course of six to eight months, with attorney’s fees topping out at $20,000 to $25,000. Depending on the mediator, a dispute could potentially be resolved in one to two weeks and cost a fraction of what you would pay an attorney.
Who are the best mediators?
Because mediation is becoming an important negotiating tool in the franchise marketplace, it’s important to select the best mediators who have a through understanding of everything faced in business by those on each side of an issue. Finding a mediator with integrity, fairness and experience is critical if either party is to respect the mediation process.
When selecting a mediator to settle a franchise dispute, consider the following:
• What is the mediator’s experience as it relates to franchising?
• Has the mediator ever walked in the shoes of a franchisee or served in the role of a franchisor?
• What is the expert’s mediation experience? Litigation experience?
• What is the mediator’s availability?
While some industry experts say that actual “subject matter experience” should not be considered essential, in the area of franchise mediation I strongly disagree. In many cases, hotel owners have embarked on a brand new career when purchasing that first hotel. And that means they are not always savvy to how the game is played or what works best in the lodging marketplace.
These "little guys" are most susceptible to what some might refer to as predatory behavior on the parts of franchisors, but, in actuality, it is often their own failure in that they have not taken full advantage of the numerous programs that franchisors offer to help its franchisees achieve the American dream. The mediator, the actual person that will help to decide the fate of the franchisee in either achieving his or her dream or walking away from it with the hope of finding success elsewhere, must know the ins and outs of franchising to be effective, and to identify what is fair and unfair. Experience in making that determination is key.
By creating a fair and balanced business environment, franchisees will not only improve their personal enterprises and situations, but the entire industry will rise to a higher level.
In the words of Mike Amin: “Fostering dialogue is a necessity in the pursuit of a healthy system, and mediation between the franchisor and franchisee could be a true "win-win' situation. Not only is it a less-costly process, but it's also a system that could foster a stronger partnership between the parties rather than the adversarial roles that can come with legal intervention. If we can reach fair and conclusive decisions that both parties are not only satisfied with but also had a hand in reaching, we will have made real progress.”
Well said, Mike.
- Common Mistakes Hotel Owners Make when Negotiating Their Franchise Agreement
- American Hotel & Lodging Educational Institute Honors Steven J. Belmonte with CHA Emeritus Award
- Belmonte Passes the Gavel
- How To Manage Change In The Workplace And Create A Winning Service Culture
- Franchisor/Franchisee Fundamentals