Corporate Law: 2 Common Franchise Disputes & How An Attorney Can Help

Posted on: 13 April 2015

Attorneys who specialize in corporate law are often solicited by those who need assistance with franchise disputes. Opening a franchise, whether it's a department store chain or a fast food restaurant, can be an exiting and lucrative venture. Unfortunately, the laws regarding franchising are quite complex, and owners often find themselves facing lawsuits regarding a breach of agreement or unpaid royalties. If you're on the receiving end of a franchise dispute, or are contemplating filing one yourself, the following illustrates a few ways a corporate attorney can provide assistance.

Regarding Breach Of Agreement Claims

Lawsuits regarding a breach of agreement are among the most commonly filed in the realm of franchising. There are myriad rules and regulations when you enter into a franchise agreement, and failure to adhere to any in the slightest degree can ultimately result in a breach of agreement. Many times, franchisees feel that the franchisor breached the agreement in failing to provide training, technical support, or marketing assistance. Other times, a change in the franchisor's business model may put franchisees at a disadvantage.

Even if the franchise agreement had provisions that stipulated such changes in the business model, it doesn't mean the change was strictly speaking legal. Contracts are largely based on the reasonableness of the agreements therein, often referred to as unconscionability. So, if the business model change resulted in a 200% increase in franchise royalties, it's likely you have a solid breach of agreement claim. Attorneys that practice corporate law are well versed in what constitutes "reasonable" and can help put a stop to bullying and unscrupulous franchises.

Regarding Unpaid Royalties

One of the most common reasons that franchisees withhold royalties is when they feel they have been the victims of a breach of agreement. The basic assumption here is that by violating the agreement, the franchisor also forfeited any legal right to royalties from the franchisee's operations.

In contract law, any material breach of contract by one party is generally grounds for the other party to cease rendering services. In the example of a franchisee who has stopped making royalty payments, his or her actions would certainly be justified if the franchisor had, indeed, breached their agreement. However, it's important to retain the services of a qualified corporate attorney to ensure that your argument is clearly articulated and, more importantly, legally substantiated.

These are just two of the many issues that might arise in the course of opening a franchise business, but they are also among the most common disputes for those involved in franchising.