Top Tips for Avoiding Disputes with Franchisees

Research shows that the franchisor-franchisee relationship is a top determinant of the success or failure of a franchise business. Fortunately, a domestic franchise attorney can help salvage broken or tense franchisor-franchisee relationships.

For franchisors, the last thing they want is embroiled in avoidable, lengthy, and costly legal tussles with their business partner—franchisees. Since toxic franchise relationships can jeopardize the business you’ve worked so hard to establish, it’s advisable to consult a domestic franchise attorney if things are not working.

Common Causes of Franchise Disputes

Each franchise business is unique, meaning that one company may experience certain disputes that are never shared by other franchise businesses. However, the common causes of franchise disputes can include the following:

Misrepresentation of facts by the franchisor;
Breaching the terms of the Franchise Agreement by either party;
Lack of training and support from the franchisor;
Misusing Intellectual Property;
Territorial disputes;
Non-compete clause disputes when a former franchisee wants to establish a similar business.

Understanding the causes of franchise disputes is the first step toward avoiding them. In other words, you can adopt the appropriate preventative measures to prevent franchise disputes.

How to Avoid Legal Disputes with Franchisees

The following are top tips to help franchisors avoid legal disputes with franchisees.

1. Avoid Misrepresenting Facts

We understand that it can be tempting to oversell your brand, but that may expose your business to legal hurdles in the future. Never make unrealistic promises to prospective franchisees.

Prospective buyers base their investment decisions on the information provided by franchisors. For instance, if you guarantee them enormous profits, they expect to get that. Otherwise, unrepresented facts can strain your relationship and jeopardize your investment.

2. Work with a Well-Drafted Franchise Agreement

The Franchise Agreement regulates the franchise relationship and is key to establishing and protecting your brand. That said, the agreement should clearly state each party’s rights and obligations to avoid future conflicts. A good franchise agreement or contract should have the following features:

Duration of the franchise;
Franchise fee;
Support and training to be provided by the franchisor;
Marketing details;
Contract renewal terms;
Sale of business terms;
Breach of contract;
Contract termination terms;
Non-compete clauses and more.

3. Seek Independent Legal Counsel

A past study showed that most franchise agreements favor franchisors. For this reason, franchisees should seek independent legal counsel before making any financial commitments.

A skilled franchise attorney can help prospective franchisees review the terms of a franchise contract and advise them accordingly. Franchisors should also seek legal help when drafting an agreement. A good contract should be balanced and fair to both parties.

4. Clear Operations Manual

A reliable operations manual should be clear. Why? Because it should help the franchisee run the business smoothly.

5. Regular Reviews

Franchisors should regularly review the performance of franchisees to ensure they are sticking to the provisions of the Franchise Agreement besides tracking performance targets.

Although franchise disputes are unavoidable, they are preventable. Always remember that your relationship’s status can impact your business’s success.