When You Should Seek The Services Of A Franchise Dispute And Litigation Attorney

The International Franchise Association continues to grow. Same way, there is a dire need for those who want to get into franchise business to be legally armed.

As a franchisee, you need to understand the legal documents required in franchising and how to raise a dispute in case of breach of contract or any other legal issue.

 This article explains who a good attorney is, what factors can lead to disputes, and why they happen.

Who is A Good Attorney for Franchise Disputes and Litigation?

A knowledgeable franchise dispute and litigation attorney will help you choose the right franchise, buy and operate one and even sell a franchise. 

Investing in franchise business is a far more significant risk than most people could imagine. There is a myriad of bottlenecks, risks, and franchise disputes in the business model that requires fixing. Most franchise dispute litigations usually happen around;

  • Franchise agreement disputes.
  • Territory disputes.
  • Financial disclosure/document compliance issues.
  • Franchise termination disputes.

Given the unique facet of franchise law, litigation can be intricate. Thus, there is a need for such a business to hire a franchise dispute and litigation attorney with ideals. The attorney should be ready to protect your interests.

Common Franchise Disputes Explained

There are so many disputes that may arise in the course of a franchise business. Some of them include:

  1. Franchise Agreement Disputes: Also called a non-adherence of a franchise agreement, a dispute between the franchisor and franchisee occurs when any of them breaches a contract. A breach of contract happens when either of the parties does not fulfill a specific obligation as stated in the franchise agreement. 

An agreement can be breached when a party fails to institute company-wide changes or fails to take part in marketing promotions. The franchisee should be given a certain amount of freedom and internal control to use an established service, brand, product, or operation method. 

  1. Franchise Territory Dispute: The territory of operation of a franchisee is agreed in advance and stated in the franchise agreement. If there is any debate, feelings of inequality, or confusion among the franchisee, a territory border dispute could ensue.

There are many cases of franchisees encroaching upon another franchisee’s territory by completing services for organizations and individuals within the territory. This may not be illegal all the time, though, but to an extent, it is. 

At times, the franchisor encroaches upon a territory when they decide to open new franchisee streets away or start selling the same products as their franchisees nearby. Therefore, a franchisee needs to pay close attention to the details of their agreements and particularly look for the word ‘’exclusive’’.

  1. Financial disclosure/document compliance issues: Every franchisor must have and provide a Franchise Disclosure Documentto prospective franchisees. The document has all the franchisee information, franchise system, and agreements that the franchisee needs to sign. The information herein helps the franchisee to make informed decisions. 

The FDD contains information such as the franchisor and affiliates, parents, predecessors, business experience, e.g., professional information, directors, officers, executives, and litigation. It should also contain current or past criminal and civil litigation for the franchisor’s management. 

There is even bankruptcy information where the franchisee will see any management who might have gone through bankruptcy. The initial fee section provides information on the range factors determining the amount of such fees. You need a good attorney for franchise disputes to help you go through this document and make an informed choice.

  1. Franchise Termination Dispute: A franchisor can issue a notice of termination to a franchisee that seeks to terminate the franchise agreement. However, some franchise termination may not be legal, and at such a point, a franchise termination dispute may ensue over the validity of the termination notice. A few reasons why a franchisor can terminate a franchise include:
  • When there is a breach of the agreement by the franchisee.
  • In special circumstances as provided in the agreement.
  • When no one has breached the agreement, yet one of the special circumstances has occurred calls for the franchise’s termination.

Suppose the termination of a franchise is not valid as per the agreement. In that case, the franchisee has the right to seek a court order to restrain termination or seek damages for any loss that they may suffer due to illegal termination.

Why Franchise Disputes Happen

Every franchise dispute is different from the other, and hence it may face a unique set of circumstances. Nonetheless, common causes of franchise disputes comprise of the following.

  • When the franchisor misinterprets services.
  • When either party breaches the franchise, agreement terms.
  • When the franchisor fails to provide promised support and training.
  • Franchisor intellectual property misuse.
  • Dispute over territory, and,
  • Breach of non-compete clauses – This happens when the franchisee decides to set up their independent business that is in direct competition with the business model of the franchisor.

Before entering into a franchise business, every franchisee should understand franchise disputes, how they happen and how they seek justice in case of breach of the terms in the franchise agreement.