Breaches Of Contract By Franchisors, Suppliers And Manufactureres

Today, courts’ general outlook is that, absent a specific franchise or distribution statute, franchisees and dealers should be held to the very narrow remedies that are specifically provided for in their written franchise or distribution agreements. Unfortunately, over the recent past, franchisees and dealers’ rights under their franchise or supplier agreements have declined precipitously. This has resulted in very inadequate, wispy and noncommittal language in these agreements, which often creates only illusory obligations on the part of the franchisor, supplier and manufacturer.

Inadequacy Of The Training And Support Leads to Breach Of Contract Claims 

Frequently, franchisee and suppliers’ breach of contract claims focus on the inadequacy of the training and support provided by their franchisor, supplier or manufacturer. Franchisors and suppliers also commonly argue that their contract was breached when a unilateral change was made to the supplier system or franchise format. Sometimes, franchisors, suppliers, or manufacturers require changes that can be excessively costly, like the expense of substantial remodeling, for instance. Other mandatory modifications, like computer changes, can be less costly, but nevertheless unreasonably disruptive to a franchisee or supplier’s business.

More difficult legal challenges may arise when a franchisor, supplier or manufacturer’s duties are not explicitly identified in the relevant distribution or franchise agreement. For instance, Jeff Goldstein and Goldstein Law’s clients frequently express that their franchisor, supplier or manufacturer mismanaged the operation of the franchise system, or unilaterally cut back on expenses. Other clients validly complain about their franchisor, supplier or manufacturer’s unfair spending of advertising funds that were contributed by franchisees or dealers, as well as franchise standards that were cut at company-owned operations, but not at franchisee or supplier owned outlets.

As noted when discussing defaults, most modern franchise and distribution agreements classify potential breaches of their agreements into serious (i.e., material) breaches and insubstantial (i.e., immaterial) breaches. Serious violations usually allow the non-breaching party to automatically terminate the agreement upon service of a notice of default and termination to the breaching party. In contrast, the less serious infringements result in a default, but not an immediate termination. In this context, like many others, there is a tremendous asymmetry of the rights and obligations specified in franchise and supplier agreements. Although supplier and franchise agreements provide for prolific bases of material default by a franchisee or dealer, these same agreements list few, if any, similar bases of material default by a franchisor or supplier.

Thus, when the default process is used against a franchisee, it has the possibility to destroy the franchisee or dealer’s businesses and personal resources. However, when the default process is applied against a franchisor or supplier, there are many legal escape hatches for it to utilize written directly into the agreement. These include the absence of a right of the franchisee or dealer to terminate the franchisor or supplier, or the lack of an obligation by a franchisor or supplier not to commit material breaches.

Success Of Goldstein Law Firm Combatting Wrongful Breaches By Franchisors, Suppliers And Manufacturers

Jeff Goldstein and the lawyers at the Goldstein Law Firm have over thirty years of rigorous expertise and experience in franchise litigation around the country. This experience includes frequently litigating cases that involve dueling charges and counter-charges of breach of contract. Attorney Goldstein’s success in defending against franchisor or supplier breach of contract allegations, as well as prosecuting breach of contract claims against franchisors and suppliers, is exceptional.

When franchisors and suppliers breach franchise and distribution agreements, Jeff Goldstein has exceled in getting franchisees and dealers out of these losing business relationships by terminating the agreement, or convincing the franchisor or supplier to modify its conduct. Further, to the extent the franchisor or supplier’s breach has caused injury to a business, the Goldstein Law Group has been successful in obtaining substantial damages for its franchisee and dealer clients.

What To Do If Your Franchisor Or Supplier Has Breached Your Distribution Or Franchise Agreement

If a franchisee or dealer suspects that their franchise agreement might have been breached, history has shown that it is critical that they contact a franchisee lawyer who represents only franchisees and dealers. Before approaching your franchisor, supplier or manufacturer about a suspected breach by them, you should consult and work with a franchise lawyer who will be able to provide you legal cover for the anticipated retaliatory response. This type of response is likely to be asserted by your franchisor or supplier as a reaction to your inquiry or complaint. Frequently, rather than working amicably to resolve a breach issue, the franchisor or supplier will attempt to ‘even the playing field’ by falsely claiming a breach of the agreement against the franchisee or dealer. Under these circumstances, your franchise lawyer should implement a legal protection plan to defend against any such counter-attack before forging forward on your affirmative breach of contract allegations.

To effectively deal with your franchisor or supplier’s breach of contract, you should contact Jeff Goldstein at the Goldstein Law Firm at 202-293-3947. Don’t let your franchisor or supplier’s failure or refusal to meet its obligations force you to lose your business.

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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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