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A franchise business is one in which an independent businessperson (the “franchisee”) sets up an additional location of an established business. This business person can do this by buying the franchise from the owner of the established business (the “franchisor”). Given the nature of franchise businesses, franchisees and franchisors tend to have fewer disputes when compared with other business associates. However, at some point, disputes inevitably arise. And when disputes arise, franchise businesses need expert assistance in order to resolve the situation. If a given dispute isn’t resolved quickly, things can quickly escalate, and an otherwise highly profitable franchise business can suffer.
Common Types of Franchise Disputes
Here are a few of the more common types of franchise disputes which can develop in the course of running a franchise business.
Breach of Franchise Agreement
This is perhaps the most common type of dispute which can arise between franchisees and franchisors. To create a franchise business, the franchisee and franchisor enter into a “franchise agreement.” A franchise agreement is a contract which lays out all the things which pertain to the franchise business: use of trademarks and license issues, operations, training, marketing, and so forth. Given the vastness and complexity of most franchise agreements, disputes involving these agreements come up rather frequently. In some cases, franchisees may fail to take part in certain marketing campaigns, or may fail to implement certain mandatory changes to the franchise business.
Resistance to Franchisors’ Demands
This is another common source of disagreement. One of the main benefits of franchise businesses for franchisees is avoiding the stress, energy and costs associated with building a successful company. In exchange, the franchisee gives up some of its freedom in how it runs and operates the franchise business. The specifics will always depend on the underlying franchise agreement, but often the franchisee resists some of the demands made by franchisors during the course of operating the business. Consider an example. Franchisors may wish for certain ingredients to always come from a specific supplier; the reason for this is to ensure consistency in the products of the business. But franchisees may end up resisting this demand, and prefer to purchase from a different supplier in order to save money. This may result in a dispute.
Unauthorized Use of Intellectual Property
When a franchisee buys into a given franchise business, the franchisee is allowed to use certain intellectual property in order to further the interests of the business. Intellectual property includes such things as brand images, slogans, logos, and so forth. Another common type of franchise disputes involves the unauthorized use of such property. If unauthorized use of intellectual property recurs, this infraction can ultimately lead to the dissolution of the franchise business.
Inadequate Support from Franchisors
As with any type of business relationship, the relationship between franchisees and franchisors is two-sided. This means that there are obligations on both sides. Just as franchisees are expected to perform certain tasks, and also refrain from certain things (in the case of intellectual property, for instance), franchisors also have certain expectations which must be fulfilled. For instance, franchisors are typically expected to provide support in the areas of employee training, marketing, internal business procedures, and others as well. Whenever a franchisee believes that this type of support is inadequate, a dispute may arise as the franchisee makes additional demands on the franchisor.
Litigation For Franchise Disputes: Contact a Top South Florida Franchise Law Firm Today
This is just a selection of the types of disputes which may arise between franchisees and franchisors. It is imperative that disputes be resolved as rapidly as possible in order to minimize costs and return to normalcy. The Trembly Law Firm has a team of talented franchise law attorneys who are available to assist in the resolution of complex franchise disputes. Give us a call today to learn more.
Frequently Asked Questions
South Florida Business Attorney Brett Trembly addresses commonly asked business law questions in his Video of the Month series. If you have any questions for us, or if you need immediate legal assistance, please contact us today.
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