A franchisee enters a business relationship with a franchisor by buying the rights to sell the goods or services of a franchise. The franchisee also has the right to use the franchise’s intellectual property. The franchise should become a joint venture where both parties reap the rewards. A franchise agreement governs their relationship. Franchise disputes arise when one party fails to deliver their end of the agreement or if the business relationship does not meet either party’s expectations.
The common causes of franchise disputes
A franchise is a business. As a franchisee, you would want significant control over your business because of the large investment you put into it. You would also expect the business to do well and to have the continuing cooperation of the franchisor. However, things do not always go as planned. Here are common reasons for franchise disputes:
- Breach of the franchise agreement
- Miscommunication between franchisor and franchisee
- Modifications to the territorial exclusivity rights
- Franchisee is not satisfied with the marketing and advertising of the brand
- Franchisor is providing inadequate support and guidance
- The franchisee is misusing the franchise trademarks
- Franchisor overvalued the potential earnings of the business
In Florida, misrepresentation is when a franchisor attempts to persuade the franchisee into signing a franchise agreement by giving false or exaggerated claims. It is illegal. A franchisor must disclose all necessary and significant matters of the franchise to the franchisee before signing the franchise agreement.
Freedom for fortune
The driving force of the business relationship between a franchisor and a franchisee is that the franchisee forfeits their freedom and internal control over the business to a significant degree. They get the rights to use the products or services and the system of operations of an established brand in exchange. The franchisee may have issues over their amount of control over the franchise and this can be areas of conflict. The franchisor may also be unsatisfied with how the franchisee manages the franchise. The franchise agreement must outline the boundaries and limitations with full disclosure; otherwise, the contract may only favor one party.