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Understanding the agreement is key to avoiding franchise disputes

| Jul 5, 2021 | Transactional Services |

Signing up for a franchise can be an excellent opportunity to piggyback your business on someone else’s success. Yet, as many people have found out to their cost, it can also come with many problems.

Franchise agreements can be complicated and full of clauses that cause problems later if you do not have the patience to read them word for word or do not have the legal knowledge to know what it all means. Remember that a franchisor will have refined their contract from its experience with other franchisees. While that should mean they ironed out problems, it may also mean they evolved the contract to provide themselves with more protection in areas where disputes have arisen before.

Commitment is a key issue in franchise agreements

For a franchise to work, both sides need to be clear about the rules and committed to upholding their side of the bargain. For example, you may feel the franchisor is not providing you with adequate support.  You may be unhappy that they give you fewer marketing materials than the store across town, allowing it to outsell you continually.

Alternatively, the franchisor may feel you are not committed to the agreement because you let your staff go home early occasionally when you had agreed to open till 10 p.m. every night. Or because you continue to stock other similar products to theirs rather than providing them with exclusivity. When you sign up for a franchise, it is crucial to understand who controls specific matters and what is and is not flexible.

The ideal time to ensure you understand the details of the franchise agreement is before you sign it. Seeking help before you sign may prevent you needing it later.  Handling a franchise dispute can be challenging, especially as you will be taking on someone far bigger than you. Yet, getting a successful outcome is not about size but about understanding the relevant laws and how they apply to your situation.