Suing Your Franchisor

If you, as a franchisee, have a dispute with your franchisor that neither of you are willing to settle, you may want to look into suing the company. Franchise attorney Mario L. Herman has represented many franchisees and has seen every type of disagreement between the two parties. If you are contemplating on suing your franchisor, you will need a franchise attorney on your side. In addition, you will need a franchise attorney to help you fully understand the dispute resolution clause in your franchise agreement before you get your hopes of up. Typically franchisors have an arbitration provision in the agreement that prevents a franchisee from suing them and thus limit their risks. You may have signed away your right to sue the company when you signed the franchise agreement.

In arbitration, a neutral third party hears both sides of the story and renders a decision that both parties have agreed to abide by. Not all arbitration agreements are bilateral. Arbitration agreements usually are held at a predetermined location which could be on the other side of the country. A franchisee may have to stay in a hotel for weeks while the meetings take place at a considerable expense. You will have to pay your round trip airfare, maybe several times, in order to be present at the hearing. You may also have to pay a portion of the arbitrator’s expenses and when there is a panel of multiple arbitrators involved, this could lead to a considerable expense. Last but not least, you will have to pay for your attorney to be present to represent you and to argue your case on your behalf.

It is important that you plan in advance when buying a franchise and understanding the dispute resolution clause in your franchise agreement is as important as anything else that the document contains. If you simply assume and glance over the arbitration clause, thinking that it will never apply to you, you are throwing away what could be a valuable lifeline down the road. Knowing whether or not you can sue your franchisor is something you will need to figure out before you invest.