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Disputes with a Franchisor

Updated: May 16, 2023

Disputes with franchisors generally fall into either of two categories. The first is misrepresentation which is a common problem in the franchise sector. Over the years there have been many legal actions against franchisors for making false or exaggerated claims in the franchise prospectus or at the initial recruitment meeting. The second cause of disputes involves the actions or, in some cases the lack of action, by the franchisor during the operation of the business.

Misrepresentation, or mis-rep as it is frequently referred to in legal circles, could involve an inflated claim about the earning potential of the business or the ease with which local sales can be obtained. It could involve a failure to disclose, if asked, the total number of failed franchisees.

In such a case, ‘If asked’ is highly relevant. Franchisees should be aware that  ‘caveat emptor’ (let the buyer beware) is a long- established principle of contract law that franchisors often rely on. It wouldn’t apply, to assist the franchisor, if  exaggerated figures for the earning potential of the business were provided but it would be a factor if the prospective franchisee didn’t bother to ask about the franchisee failure rate which later turned out to be high and would have caused the prospective franchisee to decide not to proceed.

Disputes with franchisors are usually easier to resolve by not initially using a legal remedy because tension runs high and positions polarised as soon as  lawyers are involved.  Costs can quickly mount up and the parties soon become locked in confrontation. There are many excellent firms of specialist franchising solicitors,  one of which may later become necessary, but initially at least a lower key, ‘off-line’, approach will invariably produce better results.

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