Geoffrey D. Ittleman Attorneys At Law

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Are you facing any of these common franchise issues?

On Behalf of | Apr 14, 2023 | Business Litigation

A franchise can be a great way to fulfill your entrepreneurial desires while reducing your risk.

After all, you’ll be buying into a well-established brand where you’ll be provided with the resources needed to succeed. This might include equipment, training materials, intellectual property, and marketing packets.

In other words, a franchise could put you on the path to success more quickly than building your own business from the ground up could.

That said, franchises come with their own set of challenges. When you buy into one of these businesses, you’ll be required to sign off on a franchise agreement that contains numerous terms about your responsibilities and obligations.

Running astray of these terms can lead to legal issues that can prove costly if improperly handled. On the other hand, if the parent company fails to adhere to the agreement, then you might want to consider legal action so that you can obtain what’s due under the agreement.

Common issues that lead to franchise disputes

As you head into your franchise agreement, you need to be aware of some commonly seen disputes so that you know how to avoid them and protect your interests. Here are some of the most common issues seen when these franchise agreements are in place:

  • Intellectual property misuse: The franchisor takes the protection of its intellectual property very seriously. This is understandable given the reputation and goodwill that’s associated with it. Therefore, there are going to be strong restrictions on your use of intellectual property, and any perceived misuse will likely lead to a cease and desist letter being issued to you.
  • Modifications to exclusivity rights: Your franchise agreement may give you exclusive territorial rights. But if your franchisor thinks that your business is underperforming, then they might try to modify the agreement so that they can sell another franchise in that territory. You might also face territorial issues if a neighboring franchise appears to be infringing on your business.
  • Advertising spend: As a franchisee, you’ll have to pay into a marketing and advertising pool. While this money is meant to benefit all contributing franchisees, you might find yourself at odds with how the marketing occurs and whether it truly benefits your franchise.
  • Misrepresentations: A lot of people who invest in a franchise later find out that they based on their decision on false or misleading information. If you feel that the franchisor duped you into investing in the business and signing off on a franchise agreement, then you might want to take legal action to see if you can return yourself to the position you were in before the representations were made.
  • Lack of support: Part of your franchise fees should go toward general support from the franchisor. This support might come in the form of materials, coaching, or training. While this support can be a huge help and a time-saver, it can also be problematic when it’s inadequately provided. In these instances, it might be wise to proactively seek out a resolution to the matter that ensures you’re getting what you bargained for in your franchise agreement.

Competently handle your franchise disputes

There are a lot of ways that franchise issues can crop up. If you find yourself subjected to any of them, then you need to be prepared to proactively protect yourself. This means knowing how to use the law to your advantage.