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The “Go-To Guy” For Hardball Franchise Litigation.

– Multi-Unit Franchisee Owner ($3 Million case)

Inner Workings of Franchise Law

The “Go-To Guy” For Hardball Franchise Litigation.

– Multi-Unit Franchisee Owner ($3 Million case)

Franchisee Lawyer Looking Out Window

The “Go-To Guy” For Hardball Franchise Litigation.

– Multi-Unit Franchisee Owner ($3 Million case)

Planning your new franchise

The “Go-To Guy” For Hardball Franchise Litigation.

– Multi-Unit Franchisee Owner ($3 Million case)

Businesswoman opening a franchise

The “Go-To Guy” For Hardball Franchise Litigation.

– Multi-Unit Franchisee Owner ($3 Million case)

Nationally Recognized Franchise, Antitrust, and Commercial Contracts Trial Lawyers

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Testimonials

"Jeff, I am amazed that you were able to get the liquidated damages down that low, which allowed us to avoid bankruptcy. Until we retained you we had been dealing with hotel consultants who appeared to make little head-way in lowering the liquidated damages."

Multi-Unit Hotel Franchisee, Economy Segment
(value over $3 Million)

Get Legal Assistance from Franchise Lawyers Who Defend the Franchisee

The Goldstein Law Firm is a boutique national law firm that represents exclusively franchisees and dealers, not franchisors, suppliers or manufacturers. There are only a handful of franchisee lawyer specialists remaining in the country, as most have begun representing both franchisors and franchisees.

Franchise law is a multifaceted area of law that requires specialization. Any franchise attorney can tell you about a variety of cases where franchise agreements have gone south.

Here at Goldstein, our attorneys have as much as 30 years of experience handling all aspects of franchise litigation throughout the county.

We also specialize in franchise agreement assistance, bringing you the latest developments in franchise and distribution law. With the publishing of our Franchise Trends newsletter, we can help franchisees stay updated on developments concerning different legal aspects of franchising.

Dealing with the complexities and challenges of franchise law requires focus and specialization, which is why we represent dealers and franchisees exclusively. Unlike other firms, we at Goldstein are on the side of the franchisee. We can help you decipher the fine print of your franchise agreement and single out details your franchisor may not want you to know.

Without a knowledgeable and competent franchise consultant, you may be vulnerable to the pitfalls of franchise law. Simply walking away is not a viable solution if you’re looking to protect your assets and yourself from financially damaging consequences. For those who have already signed an agreement and are struggling with franchisor difficulties, our franchise law firm also provides legal assistance through its franchise attorneys.

Frequently Asked Questions on Franchise Law:

Do franchisors have an obligation to their franchisees to act competently?

In theory, it’s possible that a franchise attorney could prove that a franchisor violated a franchise agreement by poorly managing the franchise system. Inadequately capitalizing the franchise system or poorly managing advertising campaigns could potentially violate a franchise agreement.

However, there are few if any recent case findings in which a franchisor has violated the terms of a franchise agreement. And if the franchise agreement hasn’t been violated, the courts almost never support a free-standing claim of negligence against the franchisor.

In other words, courts have held that franchisors do not owe a duty of competence to their franchisees.

It’s interesting to note, however, that many franchise law firms stay busy addressing the flip side of this issue–whether the franchisee has acted negligently in operating his or her franchise

Do franchisors have a duty to provide support to their franchisees?

On paper franchisors have this duty to some degree. Most franchise agreements explicitly set forth the respective duties owed by both the franchisors and franchisees.

However, the provisions outlining those duties owed by franchisors are few and normally too ambiguous to enforce. Most franchise agreements include contractual language stating to the effect that “the franchisor doesn’t guarantee the success of the franchisee.”

In practice, this means that franchisors really don’t have a compelling duty to provide support to their franchisees.

Also, most franchise agreements require franchisees to state in their agreements that their business venture involves risks, one of the most prominent being the business knowledge of the franchisee.

This results in a double standard: The franchisor has only a few ephemeral obligations to the franchisor. But in contrast, the “whereas” provisions in the introduction of most franchise agreements indicate that the franchisor is the undisputed guru in operating franchises in that particular industry.

What are some of the most common duties imposed on franchisors under franchise agreements?

It’s important to recognize that these duties are incredibly limited in scope. That said, they include, among other things: (1) locating appropriate sites for stores, (2) managerial assistance, (3) advertising assistance, (4) providing operating manuals, (5) training, and (6) identifying third party vendors from whom necessary products and services may be sourced.

Keep in mind, these areas are so broadly defined that even the best trial attorney would have difficulty in trying to identify – never mind proving – the contours of such duties unless he or she had extensive experience within a franchise law firm.

Are franchisors permitted to modify their requirements or system standards during the term of the franchise?

Believe it or not, they usually can make these changes. Almost all courts confronted with this question have readily permitted franchisors to change the obligations owed to their franchisees during the term of the franchise.

Franchisors gain this fluidity by lacing their franchise agreements with language that “the franchisor is permitted to modify or change the Operations Manual.” They can then “incorporate by reference” the Operations Manual into the franchise agreement.

The franchisor’s unbridled discretion is further bolstered by language in the franchise agreement that “the franchisor may modify the Operations Manual in its ‘sole discretion.'”

Everybody knows that people and businesses are subject to liability for “negligence.” Can't franchisors be held liable for negligence to their franchisees as well?

The short answer is no, not under the common law of almost every state.

When the franchisee is only claiming economic loss – which is almost always the case -the franchisee must seek its damages through a breach of contract action.

The franchisee would have to prove that the franchisor violated the franchise agreement. This is very difficult to prove, as the franchisor’s duties are usually few, ephemeral, and deliberately vague.

It’s possible a franchisor could be found liable if he or she failed to work in good faith and with fair dealing, but this is a long shot.

Note, however, that courts have found franchisors liable for negligence in certain
cases where personal injuries were involved.

Read more FAQs

Recent Litigation Issues on Franchising, Distribution and Antitrust Law

Food Franchise Termination Redux — Burned Burgers or Gay Bar?

April 28, 2017

  This food franchise dispute now in litigation in Florida has all of the expected allegations and markings of a prototypical franchisor-franchisee litigation battle in 2017: (1) a believable ulterior motive for termination (the franchisee store’s closure, according to the franchisee, was part of a scheme by the franchisor (B&B’s parent company) to oust the franchisee from the West Palm Beach dining center so the franchisor could do a competing deal with the franchisee’s competitor (Revolutions); (2) traditional ‘fraud and breach of contract’ claims by franchisee; (3) franchisee termination follows its alleged failure on a quality assurance inspection conducted by the franchisor; (4) ‘other hidden off-the-contract’ motivations for getting rid of the franchisee (franchisee was operating a gay bar on the second floor of the location, which had never before been objected to); (5) the franchisor allegedly failed to meet its contractual obligations (although the franchisee was assured 162 hours of classroom and on-the-job training, franchise claims it was provided with “zero training”; similarly, the franchisor’s “operations manual” allegedly wasn’t any help because it ‘was cut-and-pasted from manuals for sushi and Mexican restaurants’); (6) the franchisor, after the franchisee purchased the franchise, modified the entire strategic thrust of the franchise business (the franchisor allegedly moved the franchise company into the movie theater and bowling alley business — and away from a nationwide franchise roll-out, as promised); (7) the franchisor’s undisclosed strategic decision caused the franchisee to fail (according to the franchisee, with the company’s new direction, the franchisee was left […]


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Franchise Termination Results in No Beer for Anyone

March 29, 2017

Courts, Lawyers, Franchise Agreements, Right of First Refusal, Restrictive Covenant, Competing Franchisor all combine to Create the Efficient Free Market Outcome: “No Beer for Any Consumers at an Empty Restaurant.” Interestingly, from a law and economics point of view, the legal rules and process associated with this dispute have resulted in an inefficient outcome: unused restaurant space, unemployed workers, less beer being sold, and one fewer businesses paying taxes. http://www.heraldtribune.com/news/20170327/jdubs-dub-shack-beer-bar-closes  


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Seattle Hempfest and Las Vegas Hemp Festival End Franchise Agreement

February 27, 2017

It appears that no post-termination restrictions on smoking pot will be imposed on terminated former licensee. It would have been interesting to see how a court might have applied the doctrine of unclean hands in any injunctive action. What is also notable in this dispute is that the business relationship between the parties, even though it was based on a non-traditional product, was hindered by a very traditional point of conflict between franchisors and franchisees selling more traditional products — “a differing vision of what a traditional “Hempfest” event should be, so we have amicably dissolved the licensing relationship to allow the Las Vegas event to follow its vision unhindered by the contractual agreements.” http://mjnewsnetwork.com/events/seattle-hempfest-and-las-vegas-hemp-festival-end-franchise-agreement/  


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Franchise and Dealer Terminations to Take-Backs (for Free)

February 24, 2017

Instant Replay:  According to the franchisor, the franchisees are thieves and the franchisor is the good guy who is saving the community from corrupt people. Result: Massive investigations, terminations, and take-backs. The franchisor: (1) vows to stamp out underpayment of franchisee employees; (2) removes store owners who broke the rules from its system; (3) claims that “When a franchise is terminated, an independent valuation of the franchisee’s assets is undertaken and, in general, the franchisee is paid accordingly for their assets….The process for refranchising a site is also very costly and takes considerable time and corporate resources.”; (4) announced the outcome of an independent review that he said “confirmed our [franchise] model allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates”. In contrast, the franchisees: (1) claim that when Caltex forces out an owner it does so without paying compensation beyond assets, which means it could gain back stations almost free and profit from their resale or merge them into its corporate-owned store network; (2) claim that “no site with weekly shop sale of about 30K to 35K … can be profitable in your current model by fulfilling its [workplace] obligation”; (3) explain that “The truth is they [the franchisor] want the stores back to make them into company stores and that is the best way to do it – they are going to get their stores back for free.” http://www.smh.com.au/business/caltex-denies-profiting-from-terminating-franchisees-for-wage-fraud-20170221-guhqd0.html


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Franchise Terminations and Self-Inflicted Harm

February 16, 2017

In a recent franchise case the United States District Court of New Jersey (the “Court”) hammered another nail in the termination coffin of a former 7-Eleven franchisee Karamjeet Sodhi (“Franchisee Sodhi” or “Mr. Sodhi”), Manjinder Singh, and Karamjit Singh (collectively, “the Franchisees”), when it denied the Franchisees’ Motion for a stay of the Court’s Order granting judgment to Plaintiff 7-Eleven. In Sodhi, the Court found that the Franchisees failed to show that they were likely to succeed on the merits of their claims because they breached the franchise agreements by failing to pay payroll and income taxes and then subsequently failing to cure those breaches. 7-Eleven, Inc. v. Sodhi, Civil Action No. 13-3715 (MAS) (JS), 2017 U.S. Dist. LEXIS 14339 (D.N.J. Jan. 31, 2017) In refusing to grant the Franchisees’ Motion for Stay, the Court initially noted that “the standard for obtaining a stay pending appeal is essentially the same as that for obtaining a preliminary injunction, and that such a stay ‘should be granted only in limited circumstances.’” The Court explained that to obtain the stay, the Franchisees must show all four of the following factors, including; (1) the movant is likely to succeed on the merits; (2) denial will result in irreparable harm to the movant; (3) granting the injunction will not result in irreparable harm to the non-movant; and (4) granting the injunction is in the public interest. With regard to the first factor, the Franchisees argued that they were likely to succeed on the merits of their appeal […]


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Recent Blogs on Franchise, Dealership and Antitrust Law

Food Franchise Termination Redux — Burned Burgers or Gay Bar?

Apr 28, 2017

  This food franchise dispute now in litigation in Florida has all...


Read More

Franchise Termination Results in No Beer for Anyone

Mar 29, 2017

Courts, Lawyers, Franchise Agreements, Right of First Refusal, Restrictive...


Read More

Franchise and Dealer Terminations to Take-Backs (for Free)

Feb 24, 2017

Instant Replay:  According to the franchisor, the franchisees are thieves...


Read More

What to Expect in Franchise Arbitration

Nov 4, 2016

If you are facing a dispute with your franchisor, there is a good chance...


Read More
Solutions franchise blog image

Reformist Thoughts on Franchise, Dealership, Distribution and Antitrust Law

Seattle Hempfest and Las Vegas Hemp Festival End Franchise Agreement

February 27, 2017

It appears that no post-termination restrictions on smoking pot will be imposed on terminated former licensee. It would have been interesting to see how a court might have applied the doctrine of unclean hands in any injunctive action. What is also notable in this dispute is that the business...


Read More

Franchise Lawyer, Jeff Goldstein, of Goldstein Law Firm

Choosing a Franchise Law Firm to Represent You

My Franchise Agreement is Expiring, Now What? (Part I of II)

Contact Us

Goldstein Law Firm, PLLC

1629 K St. NW, Suite 300,
Washington, DC 20006

Phone: 202-293-3947
Fax: 202-315-2514

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