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4 common disputes between franchisors and franchisees

by | Jan 26, 2024 | Franchise Law |

Even if a franchise relationship seems perfect at first, most people who purchase a franchise will face conflict at some point. Handling a dispute often depends on being prepared for common sources of conflict. What common disputes do franchise locations face?

1. Disagreements about franchise fees

As Forbes notes, the fees charged for opening and operating a franchise can be a reason for franchising agreements to fall through, but those fees may also lead to conflict down the road. When franchisees do not feel that the support offered by the franchisor merits the fees charged or if franchisees fall behind on payment, it can easily lead to challenges.

2. Misrepresentation of the franchise opportunity

Franchisors may make mistakes, and their actual earnings do not match their earnings forecast. When franchisors misrepresent their company to a franchisee, however, that misrepresentation can often lead to conflict.

3. Breakdown of communication

Franchise locations depend on an ongoing relationship between the franchisor and franchisee. Disputes can easily arise if one party does not keep up their part of that relationship. This may occur if the franchisor does not keep the franchisee informed about changes to the company or if franchisees don’t communicate clearly with company leadership.

4. Franchise territory issues

When a franchise location thrives in a certain market, it may be tempting for head office to look for opportunities to open new locations nearby. However, when they encroach on an existing location’s territory, it can cause unfair competition and limit that location’s opportunities for growth. This can occur even if a location has a clearly-defined territory.

For franchisees facing conflict in their business, it can be important to carefully review their franchise agreement and explore their legal options.

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