With that being said, disputes about franchise agreements can occur. Outlined below are some of the more common causes of franchise disputes.
A franchisee takes on a franchise to ultimately make their business more profitable. A franchise agreement typically offers the use of an already established brand as well as a full support system.
For example, someone from the franchise operation will usually consult the franchisee during the transition to make sure that they get up and running without issues. Occasionally, it doesn’t work out this way and this is when disputes can arise.
If the franchisee feels that they have not received the promised support then they are likely to feel aggrieved. A franchise dispute will almost certainly arise from this.
Another way in which the franchisee may feel aggrieved is if the numbers don’t add up. During negotiations, they may have been promised that they would hit certain numbers. If these numbers fall short, then the business relationship with the franchisor may start to become strained.
Many franchise disputes also occur when the franchisee has not lived up to their end of the deal. Generally, there are stipulations within the franchise agreement which mean the franchisee must follow certain protocols in line with the brand. If a franchisee is going off brand or is underperforming, this is likely to result in disputes.
Franchise agreements can be tricky but it is possible to resolve them. This is a nuanced area of law, so be sure to seek legal guidance when addressing a dispute. Contact us today for a free consultation.
]]>The only problem is that they seem like they may be growing a little too fast. When it seems like there’s a shop or restaurant by that name on every corner, you may have good reason to be concerned. The franchise may be in the process of self-cannibalization.
In the rush to create a big brand identity, some franchisors end up over-saturating the market. When that happens, there are simply not enough customers to sustain each franchise, and they end up effectively pulling business away from each other.
That’s why a lot of successful franchisors are very selective (or outright restrictive) about where each of their locations are in proximity to each other. Unfortunately, some companies aren’t as cautious – and even big-name brands can fall into the trap. Subway, for example, has been accused of being reckless with their shop placements. They allowed (and encouraged) far too many shops to open, dividing their own market. A lot of franchise owners ended up closing their doors and losing a lot of money.
Understanding the problems with franchise self-cannibalization can help you look at the deal you’re being offered with new clarity. As part of your due diligence, it may be time to look closer at the available market so that you don’t end up making an expensive mistake.
When you’re contemplating a franchise agreement, experienced legal guidance is wise. Contact Zarco Einhorn Salkowski, P.A., and book your free consultation.
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