Few franchisees may realize it, but a franchise relationship is a business model with significant power imbalances between parties involved. That’s why it’s so important that you have a firm grasp of your rights and responsibilities to the franchisor as a franchisee. It may go a long way in protecting your business in case of any disputes eventually occur.
Some federal laws overarch state ones in terms of how franchise relationships should function. You should always look to your franchise agreement to first inform yourself of your rights, though.
Can I negotiate a franchise agreement?
Yes. If you are a potential franchisee, you do have some leeway to negotiate certain parts of your franchise agreement that you are uncomfortable with. Sometimes, the agreement may be skewed towards the franchisor, and you have a right to request changes to make it more amenable to both of you before signing it.
Do a franchisor’s standards have to be uniform for all franchisees?
While uniformity is one of the defining aspects of a franchise business, franchisors can impose different standards on franchisees for various reasons. For example, if you are located in an urban area where competition is stiff, you will need to stand out, and different standards may apply to you compared to other franchisees in a rural setting.
However, franchise discrimination may arise when there is no explanation for the different standards. It violates your rights as a franchisee, and such contrasting standards need to be justifiable.
Do I have territorial rights as a franchisee?
Well, it all depends on the terms of your franchise agreement. In some cases, you may have territorial rights, but in others, you may not. If the franchisor violates your territorial rights as per the agreement, you may be able to file a franchise encroachment claim against them.
Protect your rights as a franchisee
Disputes may arise as you run a franchise, just like in any other business. However, a clear understanding of your legal rights might save your business a lot of time and money having to litigate lingering concerns.