Hotel Franchise Agreements: Mediation, Arbitration or Litigation ...

Many hotel franchise agreements stipulate arbitration over litigation. At first glance, this may appear to be more beneficial to franchisees but nothing could be further from the truth. Compulsory arbitration protects franchisor interests while diluting franchisee remedies.

What are the disadvantages of arbitration?

First, in court you can obtain a jury trial assuming that you have not waived this right elsewhere in the agreement. Having a dispute resolved by a jury of your peers is a valuable right which should not be underestimated. Arbitrators are usually lawyers who may be friendly with your franchisor or its attorneys since arbitration clauses typically require arbitration to take place in the city where the franchisor's headquarters are located.

Second, arbitration is very expensive, even as compared to litigation.