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Disputes with franchisees

Updated: May 16, 2023

Very few franchisors manage to avoid occasional disputes with one or more of their franchisees. The causes can range from the franchisee’s non-compliance with the franchise model, the under-declaration of sales or damaging the reputation of the brand through poor customer service. The underlying common factor is generally the apathy and complacency that can sometimes develop with franchisees over a long period.

The key to resolving these types of dispute is to open a non-confrontational dialog with the franchisee as quickly as possible with the objective of resolving the problem while retaining the franchisee and rekindling a good relationship. However before doing that it is essential that the franchisor establishes the strongest possible evidence so that the dialog can be commenced from a position of strength.

The difficulty that franchisors face in this situation is that long established franchisee can become resentful towards the franchisor. This is difficult to eliminate. A disgruntled franchisee will probably share their feelings with their peers and colleagues which can make matters worse. They may be encouraged to seek advice from a solicitor and in no time at all a major dispute can develop. All too easily the franchisor will be viewed as the bully and the franchisee as the oppressed under-dog.

For this reason it is essential that the franchisor can not only show that the franchisee is unarguably the transgressor but also that the matter has been handled reasonably and in full compliance with the franchise agreement.

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