Franchise and the threat of litigation


Whilst franchises can be an excellent way of owning your business when things go well, if they go badly and you end up in franchise litigation things can get very complex. Businesses are difficult to operate in any context. Franchises add an extra degree of complexity as you have to ensure that the franchise agreement is respected and that your relationship with the franchisor remains amicable. If problems arise and franchise litigation looks imminent, you should seek legal advice from a specialised franchise litigation solicitor immediately.

Franchise litigation arises for a variety of reasons, most of which can be traced back to the terms of the franchise agreement. It may stem from the actions (or inactions) of the franchisee or the franchisor.

Franchise litigation may arise where one side of the franchise agreement believes that the other isn’t complying with the terms of the agreement and properly carrying out their end of the bargain. It may be something straightforward like the franchisee defaulting on the management service fees or other costs owing. A franchisor may perceive that the franchisee is not operating the business in the manner required under the agreement. Or a franchisee may have operated outside of the geographical limits specified in the agreement. On the side of the franchisee, the franchisee may believe that the franchisor has failed to meet their commitments in terms of initial setup, or in the provision of ongoing training and support. More complex franchise litigation can arise where one party asserts that the other is doing something which is injurious to the franchise.

Litigation should not necessarily be the first avenue pursued. Particularly where the franchise relationship is intended to continue, litigation can be more damaging than helpful to achieve a resolution. If negotiation between the franchisee and franchisor fails, you may wish to consider mediation or arbitration. The franchise agreement may include an arbitration (or other conflict) resolution clause specifying a process that must be followed.

If you would like to obtain legal advice on franchise litigation, Caven can put you in touch with a local specialist franchising solicitor free of charge. So, if you have any questions or would like our help in finding a local franchising solicitor please call us on 08001 221 2299 or complete the web-form above.

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