Buying a franchise can have many advantages over starting your own business. Two of the major benefits are the established brand recognition and proven business model.
In other words, you won’t have to start a brand from the ground up—the franchisor already did it for you. On top of that, many franchisors provide ongoing support as part of the deal, helping you maintain business growth while minimizing risk.
However, what happens when a franchisor fails to uphold their end of the bargain?
Common examples of franchisor nonperformance
There are many ways franchisors can fail to deliver on their promises or obligations. Here are some areas where franchisors may fall short:
- Inadequate training and support
- Poor marketing and advertising
- Unreliable or overpriced approved suppliers
- Poor assistance in choosing profitable locations
- Failure to keep up with industry trends
- Overly optimistic or misleading earnings claims
Your franchise agreement will tell what the franchisor must do and what you can expect. Hence, it’s crucial to review your documents before taking action. Doing so can help you see if the franchisor is truly not performing or if your expectations are different from what was agreed upon.
Potential consequences on your business
When a franchisor does not fulfill its obligations, your business could face several problems, such as:
- Financial losses due to lower sales and profits
- Poor brand reputation
- Operational challenges due to lack of training
- Increased operating costs
Most pressingly, your entire investment might be at risk if the business continues to struggle.
What you can do
If you are facing this issue with your franchisor, there are some options for resolution. These might include:
- Communicating and negotiating: Start by expressing your concerns in writing to the franchisor. Request a meeting to discuss issues and propose solutions with specific timelines. This approach may resolve problems without escalation.
- Seek mediation: If direct communication fails, consider mediation. A neutral third party can help facilitate a resolution, which is typically less adversarial than litigation. The mediator can help you find a mutually beneficial solution, such as negotiating temporary fee reductions in exchange for additional support.
- Form or join a franchisee association: Collaborate with other franchisees facing similar issues. Doing so can help provide collective bargaining power when addressing system-wide issues.
If other methods fail, consider talking to a franchise lawyer to understand your legal options. They can review your agreement, assess your case and advise on potential actions.
With legal guidance, it can be easier to protect your investment while avoiding unnecessary conflict. Take the proactive approach and use our free consultations to guide your path forward.
