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Franchise Procedure


I. Program Overview

The Franchise Mediation Program (the "Program"), was created in 1994 in collaboration with the International Institute for Conflict Prevention and Resolution (“CPR”). CPR is a non-profit alliance of corporations and law firms founded in 1979 to develop alternatives to the high costs of litigation.

The Program has been endorsed by the International Franchise Association, the Asian American Hotel Owners Association, and the American Association of Franchisees and Dealers, and has been used by many leading franchisors, franchisees and franchisee associations.

Detailed ground rules for resolving franchise disputes are set forth in the CPR Procedure for Resolution of Franchise Disputes (the "CPR Procedure"), which appears as the Appendix. The Procedure is initiated by a Dispute Letter, sent by either the franchisor or the franchisee to the other party and to CPR. If accepted by the recipient, the CPR Procedure requires the parties first to attempt to resolve their differences through negotiations between senior representatives without the intervention of a neutral third party. A majority of franchise disputes are resolved at this stage.

If CPR is notified within a specified time period that negotiations were not successful, and with the parties’ express consent, CPR provides the parties with names of five mediators located in the franchisee's region. If the parties cannot agree on a mediator from this list, they are asked to rank the candidates in order of preference and CPR will appoint the candidate with the lowest combined score.

Mediators are selected from the CPR Franchise Panel of Neutrals, consisting of prominent neutrals located throughout the United States, who are well qualified to mediate franchise disputes. Parties are free to select other mediators of their choosing, or to modify other aspects of the CPR Procedure if they both agree to do so. Parties are also free to refer directly to the CPR Franchise Panel of Neutrals here without reference to CPR for assistance.
Since the Program's inception, disputes have involved the following issues, among others:

 •  Impact/encroachment
 •  Under-reporting of sales or other financial violations of the franchise agreement
 •  Development rights of franchisee
 •  Termination of franchise
 •  Renewal of franchise
 •  Customer service

Since inception, a success rate of approximately 80 percent has been achieved in mediations in which the franchisee agreed to participate, with many more cases resolved without intervention of a mediator. Parties report that, as a result of the Program, they are resolving substantially more disputes through informal negotiations without either party needing to report to formal mediation through the Program.

II.  The Mediation Process

Mediation is a form of negotiation facilitated by a neutral third party. Mediation — facilitated negotiation — should not be confused with binding arbitration or private judging. In mediation a third party (the mediator) meets with the parties in an effort to assist them in reaching an agreement. By contrast, an arbitrator holds formal hearings and hears evidence. The mediator has no power to impose an agreement; the arbitrator is empowered to issue an award enforceable in court.

Mediation is voluntary, nonbinding and confidential. It is also highly flexible and informal. Typically, disputes that are mediated are concluded expeditiously at moderate cost compared to disputes that are arbitrated or litigated. The subject matter of a commercial mediation can be complex or straightforward. The number of parties can be few or many. The process is far less adversarial than litigation or arbitration, and therefore less disruptive to ongoing business relationships. Because other options are not foreclosed if an agreement is not reached in the mediation, entering into a mediation process is essentially without risk.

In fact, most mediations result in settlement. With the assistance of a skillful mediator, parties to a great variety of business disputes usually bridge wide gaps in their positions and often not merely settle a dispute, but develop creative, mutually advantageous business solutions. The principle pre-condition is that the parties share a genuine desire to resolve the dispute promptly in a commercially rational manner.

Mediation is business-driven and result-oriented. Each party is given an opportunity to state its legal position and its views regarding the rights and wrongs of past conduct. However, the primary focus of the mediation process is on solving problems that hinder future dealings, and developing a solution that commercially benefits all parties.

One of the important attributes of mediation is that each party can disclose to the mediator — in confidence — sensitive information or commercial interests that the party would not willingly disclose to the other party in conventional direct settlement negotiations. With such information from both parties, a mediator can often identify shared interests and business alternatives of which the parties themselves may be unaware — and which conventional negotiation could not reveal, despite the skill of the negotiators.
Parties to a dispute who agree to engage in mediation frequently resolve their dispute even before the mediation process itself has begun. Indeed, this is especially true of disputes submitted to the Franchise Mediation Program.

III.  The Role of the Mediator

The mediator, skilled in sophisticated communication and negotiation techniques, can facilitate negotiations in several important ways:

 •  By improving the effectiveness of communications among the parties;
 •  By helping each party to clarify its own underlying business interests and to understand the
     business interests of the other party;
 •  By probing the strengths and weaknesses of  each party's legal positions privately and 
    without antagonism;
 •  By exploring the commercial consequences of failing to reach agreement;
 •  By assisting the parties to generate options for a mutually advantageous resolution.

By interpreting the positions and interests of the parties in an adroit way, the mediator can actively add value to the resolution process, promoting understanding and facilitating the identification and exchange of information necessary to reach a business-driven resolution. Although the mediator does not make decisions, he or she may be requested by the parties to evaluate legal or factual positions of the parties, or to propose a “final and best solution,” within the boundaries of confidentiality that the parties themselves have agreed upon.

On a practical level, mediators serving pursuant to the CPR Procedure also facilitate the administration of the process by scheduling, arranging, and chairing the meetings, and setting the agenda. This arrangement saves the parties the cost of mediations arranged through a provider organization.

IV.  The Role of the Parties and Counsel

In a mediation, business executives or managers explain their legal positions and their business interests directly to their counterparts, rather than communicating indirectly through surrogates. Businesspeople have the best understanding of their company's interests and are best positioned to identify and evaluate creative, business-oriented solutions.

Counsel to the parties also have important roles to play in mediation:

 •   Counseling on the advisability of, and alternatives to, a negotiated resolution;
 •   Explaining, and persuading clients to agree to, the mediation process;
 •   Educating the client representative about legal issues;
 •   Drafting statements for submission to the mediator;
 •   Preparing for an effective client presentation;
 •   Serving as a “sounding board” for the client during mediation, and discussing legal and business
     options as the mediation progresses;
 •   Assuring confidentiality of the proceeding and protecting the client's litigation position;
 •   Drafting the settlement agreement and assuring its enforceability.

V.  A Typical Mediation

A mediation conducted pursuant to the CPR Procedure progresses through the following stages:

•  Preparing for Mediation. To educate the mediator about the dispute, the parties may agree to submit key information and concise statements shortly before the first mediation session. The CPR Procedure provides that these materials are returned to the producing party at the conclusion of the process, with no copies retained.

•  Location. The mediation is conducted at the offices of the mediator, or elsewhere as the parties and the mediator may agree, and in the geographic region in which the franchisee is located.

•  Initial Joint Session. At the initial joint session, the mediator usually explains the mediation process, hears short presentations from each side, and asks open-ended questions to clarify the parties’ legal positions and underlying business interests.

•  Initial Separate Sessions (or Caucuses). The mediator often then meets privately with each party to explore in a confidential setting each party's underlying interests and concerns, both legal and commercial, and to help the parties to determine their priorities.

•  Subsequent Separate and Joint Sessions. At this stage, the mediator may help the parties to generate options, evaluate alternatives realistically, and consider the consequences of not settling.

•  Completing the Process. If the parties reach agreement, the mediator will ensure that the terms of the agreement are accurately recorded. If complete settlement is not possible, the mediator will seek partial agreement, and help the parties to consider options for the remaining issues.

The length of a mediation varies with the complexity of the dispute. Mediation of a typical franchise dispute may take 10-15 hours and involve two or three sessions.

VI.  How to Participate in the Program

Parties may agree to use the CPR Procedure and to retain a mediator without referring to CPR or the Program in any way. The CPR Procedure and the CPR Panel of Franchise Neutrals are publicly available on the web at no cost, at neutrals. Parties seeking CPR’s assistance in selecting a mediator incur a nominal fee – currently $1,650 – for CPR’s services. Once the parties agree upon a mediator, CPR has no further financial interest in the proceeding and the parties retain the mediator directly. Most CPR Panelists’ rates are in the range of $250-$550 per hour, depending significantly on the location and experience of the mediator. In the absence of an agreement otherwise providing, fees are divided equally between the parties.

For more information, please contact the Franchise Administrator, International Institute for Conflict Prevention and Resolution, 30 East 33rd Street, 6th Floor, New York, NY 10016, Tel. (212) 949-6490.




Disputes between franchisors and franchisees continue to arise. On occasion, those disputes have resulted in mutually destructive litigation. This Procedure is designed to encourage more effective and efficient management of those disputes.

A.  Reasons To Initiate A Resolution Procedure

If either party to a franchisee/franchisor dispute believes the matter has not been satisfactorily resolved in the normal course of business, that party can initiate a Resolution Procedure under these rules. Participation is voluntary.

B.  Initiating A Resolution Procedure

A Resolution Procedure is initiated by a Dispute Letter from the initiating party addressed to the other party and to CPR. (A Model Dispute Letter is attached as Appendix A.) 

Within 10 business days after receiving the Dispute Letter, senior representatives of the initiating party and the recipient party will confer concerning the issues. The parties will negotiate in good faith in an attempt to resolve the issues.

C.  Commencing Mediation

Parties who have submitted a Dispute Letter, and who resolve all issues in their dispute through negotiation, are asked to promptly advise CPR. Parties who have not resolved all issues in their dispute through negotiation, and who wish to proceed with this Resolution Procedure, should either agree upon a mediator or promptly notify CPR that they wish CPR to begin selecting candidates to mediate the dispute, as provided below.

D.  Selecting The Mediator

Within ten (10) business days of receiving notice from both parties that it should begin the selection process, CPR will submit to the parties the names of no fewer than five (5) candidates from the region in which the franchisee is located, with their resumes, hourly rates and disclosures as provided below. If the parties are unable to agree on a candidate from the list within five (5) business days following receipt of the list, each party will, within ten (10) business days following receipt of the list, send to CPR a list of candidates ranked from number 1 to number 5 in descending order of preference. The candidate with the lowest combined score will be appointed as the mediator by CPR.

Every mediator candidate will promptly disclose to CPR, and CPR will convey to the parties, any circumstances known to him or her which would cause reasonable doubt regarding the candidate's independence, impartiality or neutrality,1  including any relationship of the individual with franchising or the franchise industry during the past five years. If such circumstances are disclosed, the individual will not serve, unless both parties agree.


1 Independence means the absence of any objective link (personal or business relationship) between the mediator and any of the parties. Impartiality refers to a subjective attitude of the mediator, who should not favor one party over another. Neutrality refers to the position of the mediator, who should have no direct interest in the outcome of the mediation.

E.  CPR Fee; Mediator Expense

Parties are not obligated to seek CPR’s assistance in selecting a mediator. Parties who do seek the assistance of CPR in selecting a mediator agree to compensate CPR $1,650 (plus reasonable and actual out-of-pocket expenses) as an administrative fee for its services in selecting the mediator. The mediator's compensation rate will be determined before appointment. The parties will each pay 50% of these fees and any other costs of the process.

F.  Ground Rules

The ground rules of the mediation will be:

1.  The process is non-binding.

2.  The mediator will be independent, impartial and neutral.

3.  The parties will cooperate fully with the mediator.

4.  The mediator controls the procedural aspects of the mediation.

 (a) The mediator may meet and communicate separately with each party.

 (b) The mediator may hold an initial joint meeting with both parties and then decide when to hold joint and/or separate meetings. The mediator will fix the time, place and agenda for each session. There will be no record of any meeting. Formal rules of evidence will not apply.

5.  At least one representative of each party who is active in the mediation will be authorized  to negotiate a  resolution of the dispute.

6.  The process will be conducted expeditiously. Each representative will make every effort  to be available for meetings.

7.  The mediator will not transmit information received from any party to another party, or to  any third party, unless authorized to do so by the party producing the information.

8.  The entire process is confidential. Unless otherwise agreed to in writing, the parties and the mediator will not disclose to any other person any fact regarding the mediation process, any statements made or information disclosed in the course of the mediation, the Neutral Evaluation described in paragraph J below, or the terms of a proposed resolution. The entire Resolution Procedure shall be treated as an offer to compromise under the Federal Rules of Evidence and applicable rules of evidence of any applicable jurisdiction and inadmissible in any subsequent court or administrative proceeding to the fullest extent permissible.

9.  In the absence of an agreement to the contrary, mediation proceedings under this Procedure shall have no impact on the parties’ legal rights. Parties to any proceeding hereunder do not waive, but rather retain, every claim, defense, right or privilege under applicable procedural law or rule, and may initiate and judicial or administrative proceeding that they deem in their best interest.

10.  The mediator will be disqualified as a witness, consultant or expert in any pending or future investigation, action or proceeding relating to the subject matter of the mediation.

11.  The mediator, if a lawyer, may freely express views to the parties on any legal issues underlying the dispute, without establishing an attorney/client relationship.

12. The mediator may obtain expert or administrative assistance subject to the agreement, and at the expense, of the parties.

13.  Unless the parties agree otherwise, the procedure will be deemed terminated without any agreed upon resolution if:

 (a)  After 60 calendar days from the date the Dispute Letter is received by CPR, a written resolution has not been agreed upon by the parties and a party has given written notice to the mediator of its intention to withdraw and the mediator has provided the parties with the Neutral Evaluation described in paragraph J, below, or

 (b)  The mediator concludes that further efforts would not be useful and has provided the parties with the Neutral Evaluation described in paragraph J, below, or

 (c)  A party essential to the resolution of the dispute gives written notice of an intent to withdraw from the procedure.

14.  Neither CPR nor the mediator shall be liable for any act or omission in connection with  the mediation.

15.  At the beginning of the mediation, each party will agree in writing to all provisions of  this procedure, as modified by agreement of the parties.

 G.  Presentation To The Mediator

At least five (5) business days before the first mediation conference, each party will deliver to the mediator a statement summarizing the dispute's background and such other information it deems necessary to familiarize the mediator with the dispute. The parties will submit jointly their franchise agreement and any other materials they agree upon. The mediator may request that each party provide clarification and additional information, and present its case informally to the mediator at the initial joint meeting or at later separate meetings.

The parties are encouraged to exchange all information submitted to the mediator to further each party's understanding of the other's approach to resolution of the dispute. Except as the parties otherwise agree, the mediator shall keep confidential any information submitted. At the conclusion of the mediation, the mediator will return to each party all written materials which that party provided to the mediator, without retaining copies.

H.  Exchange Of Information

If either party has a substantial need for documents or other material in the possession of the other party, the parties will attempt to agree on the exchange of requested documents or other material. Should they fail to agree, either party may request a joint meeting with the mediator to assist the parties in reaching agreement. At the conclusion of the mediation process, the recipient of documents will return them to the originating party without retaining copies.

I.  Negotiation Of Terms

The mediator may promote a resolution in any manner the mediator believes is appropriate. The parties are expected to initiate proposals for resolution. If the parties fail to develop mutually acceptable settlement terms, before terminating the procedure the mediator may submit to the parties a final settlement proposal which the mediator considers fair and equitable, if both (a) all parties request such a proposal and (b) the mediator determines that he or she is professionally qualified to do so. The parties will carefully consider the mediator's proposal and, at the mediator's request, discuss the proposal with the mediator. If any party does not accept the final proposal, it will advise the mediator of the reasons why the proposal is unacceptable.

J.  Neutral Evaluation

If the mediator concludes that mediation techniques have been exhausted and the parties have not reached agreement, or if either party has given written notice of its intent to withdraw, the mediator may give both parties a written Neutral Evaluation of the issues, including the mediator’s opinion of the likely outcome of the dispute at arbitration or trial, if both (a) all parties request such a proposal and (b) the mediator determines that he or she is professionally qualified to do so. (If a party has given written notice of intent to withdraw pursuant to Section F(13)(c) above, the Neutral Evaluation shall be given to the parties within 10 business days of the mediator's receipt of the notice and the parties’ consent thereto.) Shortly following delivery of the evaluation, the mediator will call another mediation conference, in the hope that the mediator's evaluation will lead to a resumption of negotiations.

K.  Resolution

If a resolution is reached, the mediator shall ensure that a written memorandum is prepared and initialed by all parties, incorporating all terms, including mutual general releases from all liability relating to the subject matter of the dispute. A formal settlement agreement shall be promptly circulated and executed.

Model Dispute Letter

[Name and address of franchisee/franchisor] Attention [Officer of franchisee/franchisor] 
International Institute for Conflict Prevention and Resolution
30 East 33rd Street, 6th Floor, New York, NY 10016

Attention: Franchise Mediation Program

Dear Sirs:

I request commencement of a CPR Procedure For Resolution of Franchise Disputes to address the following issue: [brief description of the issue or issues].

I understand I will be contacted by a senior representative of [franchisee/franchisor] within 10 business days after this letter is received by [franchisee/franchisor]. If the issue is not resolved by direct negotiation between the parties, and if all parties agree, I understand that CPR will be instructed to prepare a list of mediator candidates, at the parties’ expense.

I [or a senior representative] will personally participate in any negotiation or mediation conference.




For information on how to file a matter with CPR, see File a Case | CPR International Institute for Conflict Prevention & Resolution (

Effective July 1, 2022, all references in Rules, Procedures, Protocols, Model Procedural Orders, Model Clauses and Guidelines to The International Institute for Conflict Prevention and Resolution, Inc. or CPR shall be deemed a reference to CPR Dispute Resolution Services LLC.

The information and resources on this website should not be construed as legal advice or opinion, or as a substitute for the advice of counsel.