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Leading causes of franchise disputes

On Behalf of | May 27, 2024 | Franchise Agreements

Franchising can offer a unique opportunity for you to own and operate a business under an established brand, benefiting from its repudiation, proven business model and ongoing support. This can provide you with a higher likelihood of success compared to starting a business from scratch.

Despite these benefits, disputes can arise between franchisors and franchisees. Understanding the potential causes and working to address them can help maintain a positive franchising relationship while protecting your business interests. Here are some of the leading causes of franchisor-franchisee disputes.

Misrepresentation of facts

Disputes often arise when reality does not align with expectations due to exaggerations of promises made during the acquisition. For instance, if the franchisor misrepresented the potential earnings or support provided, it could lead to disagreements.

Territorial disputes

Franchise agreements grant franchisees exclusive rights to a specific territory. Conflict can arise if a franchisor allows another franchisee to encroach on your territory, potentially cannibalizing your business.

Non-compliance with the franchise agreement

Franchise agreements come with rules and standards that both parties must adhere to. This includes things to do with quality standards, marketing guidelines and other operations procedures. Non-compliance with the franchise agreement by either party is a common cause of these disputes.

Renewal and termination disagreements

A franchise agreement has a defined term, and disputes may arise when it’s time to renew or terminate it. For instance, there could be disagreements when the franchisor decides not to renew or if there are punitive post-termination restrictions that may affect your business interests. 

Remember, you have rights as a franchisee, and you should not be afraid to assert them. Seeking qualified guidance when locked in a dispute with the franchisor can help resolve the matter while protecting your legal and financial interests.