National Franchise Law And Commercial Litigation Firm

Our law firm is engaged in all facets of franchising and franchise relationships. For a prospective franchisee looking to purchase a franchise, it is crucial to enlist the services of an experienced lawyer well-versed in the rules and laws governing franchising. The Federal Trade Commission mandates that each franchisee be provided with an FDD (Franchise Disclosure Document) by the franchisor. This document, containing about 23 different items of disclosure, informs the franchisee about the nature of the business, leadership, bankruptcy history, required investments, supply sources, vendors, and other essential details.

Among the critical exhibits in the FDD, the franchise agreement holds paramount importance. This agreement, which is an exhibit to the FDD, outlines the document governing the relationship between the franchisor and the franchisee. It is imperative for every prospective franchisee and their legal representatives to thoroughly read every word of the FDD, especially the franchise agreement. Failing to do so would be reckless, irresponsible, and may lead the franchisee down a regrettable path.

Franchise cannibalization and encroachment pose significant challenges for franchisees. When a franchisor aims to saturate a specific market with additional stores in close proximity to existing locations, it leads to an immediate shift in sales from older stores to the newly established ones. To address this concern, franchisees are advised to negotiate, at the outset of the franchise relationship, for a protected exclusive territory surrounding their location.

Securing a written protected territory in the franchise agreement is crucial. In the absence of such a provision, unless state statutes offer exclusive territory protection, franchisors may believe and typically have the right to place competing units in close proximity to existing locations. This lack of protection could severely impact sales growth and, consequently, the profitability of franchisees.

Franchise litigation is considered a last resort in this law firm when seeking a remedy or relief for disputes between the franchisor and franchisee. The firm always endeavors to resolve conflicts through alternative methods before resorting to litigation. While methods such as face-to-face meetings, settlement conferences, or mediations are initially pursued, there are instances where these approaches are unsuccessful in achieving the desired remedy. In such cases, litigation becomes the ultimate recourse.

Litigation can encompass a broad range of legal claims. Declaratory actions may arise when there is disagreement over the interpretation of contractual provisions or the expectations placed on the franchisee. Breach of contract provisions may be invoked when one party fails to fulfill their obligations under the contract. The breach of the implied covenant of good faith and fair dealing is another aspect, where parties are expected not to interfere with each other’s ability to benefit from the contract. This is typically implied in most states but often tied to an express provision in the contract. Fraud claims, negligence claims, violations of statutory regulations, deceptive and unfair trade practices, as well as breaches of state pre-sale disclosure statutes are among the various claims that may emerge in franchise litigation. Additionally, certain states may have specific franchise relationship statutes, and violations of these statutes can lead to legal claims. The nature of the claims depends on the specific issues involved in each case.

If a franchisee believes they have been wrongfully terminated, the franchisor bears the obligation to demonstrate that the termination was indeed proper. The franchisee, with such a belief, can approach the court and seek a determination on the validity of the termination. Typically, when a franchisee is terminated and wishes to continue operating the business using the franchisor’s brand during the franchisor’s assessment of the termination’s propriety, the franchisor may go to court to seek a preliminary injunction. This injunction aims to halt the franchisee’s business operations, preventing further use of the brand.

During this hearing for the preliminary injunction, the franchisor must establish, before obtaining a court ruling confirming the termination’s appropriateness, that the termination was indeed proper. This process is scrutinized by franchisees and observers alike, as an unjust termination reflects poorly on the franchisor’s actions.

Non-compete agreements are increasingly becoming subjects of legal disputes. Employees working within a franchise who seek employment elsewhere may face challenges if bound by a non-compete, especially lower-compensated employees. For franchisees, the justification of a non-compete is enhanced if consideration or value was provided by the franchisor. However, when a franchisee, due to termination or the expiration of the franchise relationship, aims to compete in the same industry in a different state or market, they can challenge the franchisor’s attempt to restrict competition. The legitimacy of a non-compete is assessed based on factors such as clarity, reasonableness in scope (e.g., distance), and reasonableness in duration (e.g., time). Generally, longer durations and broader scopes make non-compete provisions less likely to be enforceable. These circumstances require careful consideration and appropriate weighing.

Tremendous benefits are associated with forming a franchisee association for a specific brand. First and foremost, unity provides strength, creating a collective voice that ensures the franchisor recognizes a common situation shared by many franchises. This unified approach is more impactful than dealing with issues individually. While some franchisors may not appreciate franchisees joining such associations, the legal landscape, including the First Amendment and state laws, supports freedom of assembly and association. Many states have statutes recognizing franchise associations, allowing individuals to unite and assemble. Apart from a minimal financial contribution as a membership fee, the benefits significantly outweigh any potential drawbacks.

Franchise agreements typically include provisions allowing a franchisor to terminate the agreement if the franchisee fails to meet contractual terms, obligations, or standards set by the franchisor. However, it is uncommon for franchise agreements to provide a similar termination option for franchisees. Despite this, a franchisee can argue that, due to the franchisor’s negligent conduct or failure to fulfill obligations, there has been a constructive termination.

For instance, if the franchisor ceases to supply the franchisee with a proprietary product essential for business operations, and such action is deemed unjustified, the franchisee may claim constructive termination. In certain businesses, like hotel contracts, franchisees may negotiate an early exit window, allowing them to exit the agreement before its term concludes. However, such arrangements are rare as franchisors typically aim to maintain brand consistency and value over time.

The first mistake that franchisees commonly make when opening a new franchise is failing to read their franchise agreements. The second mistake is neglecting to speak to existing franchisees to gather insights about their experiences. Additionally, they may overlook reviewing the language in the Franchise Disclosure Document (FDD) that details prior litigation involving the franchise and franchisor over the preceding years, typically the last 10 years.

Another significant error is not actively participating in the buildout or the construction and development of the physical location. Hiring the right people is crucial, and there is a concern when franchisees deviate from the franchisor’s guidelines and standards, attempting to cut corners or assuming they know better. While there may be instances where the franchisee’s approach is valid, collaboration with the franchisor to ensure alignment with proven business methods is essential.

You have issues with the advertising fund that many times I have currently about half a dozen matters that I’m dealing with where we have evidence that the franchisors are dipping into the marketing and advertising fund in order to offset operational expenses. That would otherwise fall on the P&L of the franchisor. And the reason to do that is well naturally if you reduce the expenses you’re going to increase the net income of the the company, right, and once you do that and you apply multiple you increase the valuation of the company. So there’s other factors. Exactly. So there’s an incentive there for that to occur.

And tech fees, tech fees are just a let me put my hand in your pocket under the guise and it’s the technology fee that you need to pay for us to provide you with the technology that we should be providing you anyway which is one of the reasons why you pay the royalty and service fees. Or franchisors have now realized that we could pass on the tech fee obligation to a franchisee as a separate item that that would become then the obligation of the franchisee and again the franchisor’s net income goes up. Franchises have to understand and know that whenever the franchisor says, “Oh, we need you to sign this document because we have a a new agreement for the tech fee or this and that.”

Whenever the franchisor requires you to sign a document, it is an automatic red flag that they are acknowledging that the existing franchise agreement that you have with them doesn’t authorize them to do what they’re asking you to do. So the minute that you sign this document, you have now amended your franchise agreement without even knowing it. And that’s what’s going on with tech fees. Wow.

How can you and your law firm help franchisees and franchise associations succeed?

You know, it’s all about information—how they say, knowledge is power. We’ve developed a specialty and concentration in franchise law, dealership law, distributorship law, and other complex commercial areas. As a result, we have years and years of experience.

As you know, we’ve represented franchisees from over 500 different brands throughout the years. There’s a wealth of information that comes from that. And we bring all of that knowledge to each client we represent.

It gets to a point where, when I talk to people and they ask, “Do you have a crystal ball?”—I say, “No… but believe it or not, I actually do in this area of law.” Because it’s a rare event when a new issue arises that I haven’t already handled—again and again.

I know how it starts, I know how it plays out, and now, I typically know how it ends.

Why have some of these issues remained so repetitive over the years?

It’s really unfortunate—but a lot of people just don’t listen. It’s very common for me to give speeches at the national level—in front of associations, leadership groups, franchise groups—and I tell them: Do this. Don’t do that. Follow this kind of direction when a situation arises.

And lo and behold, a month, two months, three months later, I get a call from someone who was sitting in that very room. I’ll say, “Wait a second—you’re telling me something I clearly remember addressing during that meeting. I specifically said this is not a good approach.”

And the response? “Well… I did it anyway.”

It’s fascinating how some people, despite receiving advice and guidance, stay stuck in their ways and simply don’t listen.

You often refer to yourself and your firm as “the great equalizers.” Why are you and your law partners so uniquely suited to help franchisees and franchise associations resolve disputes and negotiate with franchisors?

That’s probably one of the biggest factors contributing to our success—and especially the success of our clients.

We’re called the equalizer because, historically—and still to this day—when a franchisor gets into a battle with a franchisee, it’s a classic David vs. Goliath situation. By the time the franchisee needs legal help, they’re often already financially decimated.

In these situations, the franchisor doesn’t necessarily have to worry about the actual merits of the case. As long as they keep the franchisee tied up in legal fees and delays, they know the franchisee likely won’t survive financially. In many cases, they win by default—not because they’re right, but because the other side simply can’t afford to fight.

What makes us different is that, after more than 40 years, I’ve been fortunate to do extraordinarily well financially. Our firm is in a position to take on these complex, high-stakes cases—no matter how long they last, which can often be two to three years—on a contingency fee basis.

That’s why we’re the equalizer. The franchisors used to say, “We’ll run the franchisee into the ground.” Now, they have to ask, “Are we prepared to try and run Zarco into the ground?” And the truth is—they can’t. I’m very comfortable in that space, and we have the resources to stand toe-to-toe.

Ultimately, we provide something most franchisees never had before: the key to the courthouse.

Of course, that’s only after we’ve explored every possible alternative method to resolve the dispute—because our first goal is always to work things out without litigation, if possible.

Your firm stands out because you don’t operate in silos like many others in the legal community. Can you explain what makes your approach unique?

Yes, because it’s very common in the legal field for firms to operate in silos. You’ll often find one attorney who specializes in contracts and another who handles litigation. So when a matter becomes contentious, the case gets passed around.

That doesn’t happen in our firm.

We handle everything from A to Z—in any type of franchise relationship, as well as in distributorships, licensing, and dealerships. From the very beginning to the very end, we’re fully involved. That includes drafting agreements, reviewing and analyzing documents already presented to us, negotiating terms, and assisting franchisees in launching and operating their businesses.

We also support clients in the sale of their business, or in cases where a franchise relationship is ending—whether due to expiration or termination. If a dispute arises at any point in that process, we’re there to handle negotiations, mediations, arbitrations, or litigation.

Our firm is known for being exceptional trial lawyers—not just litigators. That’s an important distinction. There are many litigators who never actually try cases in court. We do.

Another unique asset we bring is rare in the legal world: a deep background in finance, accounting, and economics. Many skilled attorneys lack the financial understanding needed to properly evaluate a legal dispute, and often must rely on outside experts. That can create disconnects and added costs for the client.

Too often, lawyers give legal advice in a vacuum—and business professionals give business advice in a vacuum. I’m in a unique position where I always assess the business consequences of the legal advice I offer. Likewise, I frequently provide business advice, but I do so carefully—always within the boundaries of the law—to ensure that a great business decision doesn’t inadvertently lead to a legal violation.

It’s that balance—between legal expertise and business insight—that truly sets us apart and positions us to deliver the most effective, strategic advice to our clients.

Many single-unit franchisees often feel they can’t afford to work with a firm like yours to protect their business. Can you speak to that—and the role your firm plays in helping level the playing field?

Absolutely. You’re right—many single-unit franchisees, because of the economic realities they face, often feel like they can’t work with someone like me to defend their business or protect their franchise investment. That’s why the points you raised—about contingency fee opportunities and the ability to leverage the strength of our firm against the franchisor to reach a positive resolution—are so important.

The reality is, when you’ve reached a certain point in your career—when you’re at the apex or pinnacle, and you’ve been financially rewarded for that success—I believe it becomes a responsibility to give back. To give back to the community, to the profession, and to the industry that has been so close to my heart for so many years.

There are cases I take on fully knowing that the firm may actually lose money on them. And honestly, I don’t care. I don’t care—because I’m not doing it for the money. I pursue justice. I can afford to do it, and more importantly, I want to do it.

I find deep satisfaction in being able to change someone’s life in a way that most others can’t. And for me, that’s incredibly fulfilling.

If there’s one thing I hope people remember when I’m no longer around, it’s this: I pursued justice—not just success. And that, I hope, is the legacy I leave behind.

What are some of the greatest challenges franchisees are facing right now, and how is your firm helping them navigate or prepare for these issues?

One of the most important things franchisees—and frankly, franchisors—need to understand is this: most legal disputes stem from a lack of communication between the franchisor and franchisee.

Franchisors often introduce new policies that they believe will benefit the system. But there’s an inherent conflict of interest between franchisors and franchisees. A franchisor typically wants to increase a franchisee’s gross revenue, because royalties are calculated as a percentage of that revenue. So, the more gross revenue, the more the franchisor earns.

The franchisee, however, has a different objective. Yes, they want to increase gross revenue—but only if it also improves net income and profitability. That’s not always the case.

Take promotional discounting as an example. A franchisor may encourage “Buy One, Get One Free” offers or other loss-leader strategies. These promotions might drive higher gross sales—which, again, benefits the franchisor through increased royalties—but they often hurt the franchisee’s bottom line. Why? Because the cost of goods sold, labor, and other operational expenses to fulfill those discounts may exceed the revenue gained.

Now, add to that the franchisor’s push to enhance gross revenue even further by requiring franchisees to spend more—on technology fees, advertising fund contributions, and, in many cases, remodeling mandates.

Remodeling is usually outlined as a requirement in the franchise agreement. But the real issue is scope. Is the remodel request commercially reasonable? Does it deliver a return on investment that makes financial sense for the franchisee?

Franchisors often operate under what I call the OPM Principle—Other People’s Money. It’s easy for a franchisor to say, “I want you to invest in all-new kitchen equipment, update the furniture, upgrade the façade, and redo the landscaping.” All of that contributes to a refreshed brand image—which is great for the franchisor. But for the franchisee, the cost may not be justifiable.

And that’s where our firm comes in.

We help franchisees evaluate whether these requirements are fair, feasible, and financially sound. We push back when mandates are imposed without empirical evidence or without considering the financial burden placed on the franchisee.

By bridging the communication gap, analyzing economic consequences, and advocating for fair practices, we help franchisees protect their investment while holding franchisors accountable to standards of reasonableness and transparency.