Common Franchise Disputes

As much as franchisors and franchisees want to avoid them, franchise disputes often happen.  As a business owner, the first thing you should do in a disagreement is schedule a meeting to discuss the dispute's cause. After identifying the root cause of the conflicts, the next step is finding a solution that satisfies both parties. Hiring a dispute attorney would be of great help when receiving your issues.

Common Franchise Disputes

The procedure by which a prospective franchisee formally joins a franchisor's team is meticulous; both sides sign a comprehensive franchise agreement that covers practically every relevant topic and possibility. 

Usually, there is harmony, and the franchisee knows what they are getting into. But there's a chance of conflict because of how special this business connection is. The following sections describe a few typical ways a franchisor and franchisee could enter a dispute:

Claims By Franchisees That Franchisors Do Not Provide Adequate Support

Franchisees who feel they need adequate support from their franchisor may find themselves in a difficult position. While some franchisors support their franchisees, others may be less supportive. This can lead to tension and conflict between the franchisee and franchisor and, in some cases, may even lead to litigation.

Some common complaints by franchisees include that the franchisor needs to provide more marketing support or that the franchisor needs to provide more financial assistance. Other franchisees may feel that the franchisor needs to offer adequate training or product support. Whatever the complaint, it is essential for franchisees to remember that they have rights and recourse if they feel they are not adequately supported by their franchisor.

If you are a franchisee and feel that your franchisor is not providing adequate support, there are some steps you can take:

• Talk to your franchisor directly. Try to resolve any issues directly with your franchisor before taking further action. Often, simply expressing your concerns to your franchisor can lead to a resolution.
• Review your franchise agreement. Your franchise agreement should outline what kind of support you can expect from your franchisor. If you feel like your franchisor is not living up to the terms of the deal, you may have grounds for legal action.
• Seek out other franchisees. Talk to other franchisees in your system to see if they are experiencing similar problems. If other franchisees also have issues, it may strengthen your case against the franchisor.
• Speak with a lawyer. If you’ve tried to resolve the issue directly with your franchisor and have been unsuccessful, you may want to speak with a franchise dispute attorney. A lawyer can help you understand your legal options and rights under your franchise agreement.

Disagreements Over The Source Of Raw Materials

A few common franchise disputes tend to crop up again and again. One of the most common is disagreements over the source of raw materials. The franchisor may have a preferred supplier for the raw materials used in the product or service and may require franchisees to purchase from that supplier. 

However, the franchisee may get a better deal on raw materials from another source. This can lead to tensions between the franchisor and the franchisee, as the franchisor may see this as a breach of the contract.

It's important to carefully read over any contracts before signing them to ensure you understand the requirements for purchasing raw materials. If there is any ambiguity, it's best to get clarification from the franchisor before proceeding. Otherwise, you could end up in a lengthy and costly dispute.

Misuse Of Franchisor’s Intellectual Property

When a franchisor licenses its intellectual property to a franchisee, it does so with the expectation that the franchisee will use that intellectual property following the terms of the franchise agreement. Unfortunately, sometimes franchisees misuse the franchisor’s intellectual property, leading to many disputes between the parties.

One common dispute arises when a franchisee uses the franchisor’s intellectual property in a way that is not authorized by the franchise agreement. For example, a franchisor may allow franchisees to use their trademarks and logos on their websites and marketing materials, but only under certain conditions. 

If a franchisee uses the franchisor’s intellectual property in a way that violates those conditions. For example, by using an unauthorized logo or the trademarked name in an unauthorized manner, the franchisor may have grounds for a dispute. This type of dispute can damage the franchisor’s reputation and business.

Disputes Over Non-Adherence To The Franchise Agreement

If a franchisee is not adhering to the terms of the franchise agreement, it can be a significant cause of disputes between the franchisor and franchisee. The franchisor may feel that the franchisee needs to follow the brand standards or run the business according to the agreed-upon methods, while the franchisee may think that the franchisor needs to be more relaxed.

Both parties must discuss their concerns when non-adherence to the franchise agreement becomes problematic. Often, these disputes can be resolved through negotiation and compromise. However, if the parties cannot agree, they may need to resort to mediation or arbitration.

If you are considering purchasing a franchise, it is essential to know the potential for disputes. These disputes can arise between the franchisor and franchisee or between multiple franchisees. Common issues leading to franchise disputes include territory, marketing, and operations. While it is impossible to avoid all conflicts, knowing these potential issues can help you prepare for them if they arise.