Buying a franchise: checking dispute resolution terms

Joining a franchise network is about working together. But before committing your money, you need to know what will happen if a serious disagreement arises. The dispute resolution clause is not a mere formality: it sets out the procedure, location and potentially the language in which you will pursue your rights. A process that is difficult to access in practice can make even a valid claim hard to pursue.

1. Distinguish the governing law from who will hear the dispute

Start by identifying two separate provisions: which law governs the agreement and who will resolve the dispute. Choosing Greek law does not automatically mean that every dispute will be heard in your local court. Equally, naming the courts of a particular country does not, in itself, tell you which law applies.

Greece has no specific legislation providing a comprehensive framework for franchise agreements. The main rules are the general provisions of the Greek Civil Code on contracts and obligations, including good faith and the prohibition on the abusive exercise of rights. Depending on the issue, commercial law, competition law and intellectual property rules also apply.

There is no specific mandatory pre-contractual disclosure document or dedicated franchise register. Codes of ethics are tools for self-regulation, not state-run dispute resolution procedures. Do not therefore assume that a franchisor’s membership of an association replaces your contractual protections or access to the courts.

Ask an independent lawyer to check the validity and scope of the clause, particularly where it specifies foreign law or courts abroad. A contractual choice does not automatically override all mandatory rules of Greek or EU law.

2. Understand the steps before legal proceedings

An agreement may set out successive stages: written notice of the dispute, a meeting between senior representatives, mediation and, finally, court proceedings or arbitration. A staged process can help preserve the working relationship, provided it does not leave the franchisee waiting indefinitely.

Specifically, check:

• Who receives the notice, and how is receipt proved?
• When does each stage start and finish?
• What happens if the other party fails to respond or attend?
• Can you seek urgent relief from a court without waiting for discussions to end?

Mediation is not arbitration. In mediation, a neutral third party helps the parties try to reach an agreement. In arbitration, the dispute is referred to an arbitrator or tribunal that issues a decision. Do not treat these terms as interchangeable.

Nor should you assume that negotiations automatically interrupt or suspend all statutory time limits. Your lawyer should separately check the deadlines and the steps needed to preserve your claims. The discussion process needs a clear endpoint, not simply an obligation to keep talking “until a solution is found”.

3. Calculate the real cost of access

Your assessment should go beyond legal validity. Consider whether you could realistically use the agreed process for a dispute over charges or a failure to provide agreed services.

Ask for an indicative breakdown of potential costs: legal fees, travel, translations, expert reports and, where arbitration is specified, arbitrators’ fees and administrative charges. There is no single cost for every case; it depends on the procedure, complexity and value of the dispute.

For an arbitration clause, identify the seat of arbitration, the applicable procedural rules, the language, the number of arbitrators and how they are appointed. Also read the provisions on advance payments towards costs and the final allocation of costs. The seat of arbitration has legal significance and is not necessarily the place where a hearing takes place.

A useful practical question is: would it make financial sense to pursue a modest claim that still matters to my outlet? If the answer is no, discuss a more accessible procedure before signing. Do not take it for granted that all your costs will be reimbursed if you win.

4. Ask for consistent, workable wording

Compare the main agreement with its schedules and any separate supply or software-use agreements. Conflicting clauses can create uncertainty about where each claim should be brought. Ask for clarification on which provision takes precedence and which disputes it covers.

Also check whether the procedural options are balanced. Can only the franchisor choose between different courts, while you are tied to a distant location? Are there exceptions that significantly broaden the franchisor’s options? These points require a case-specific legal assessment, rather than an automatic conclusion that the clause is invalid.

Practical takeaway: before signing, you should be able to explain in one paragraph where, how and in which language you would pursue your rights, and the main types of costs involved. If you cannot, ask for clarification and precise wording in the agreement.