Sep 27, 2017 - Blog by |

When you purchased your franchise, you never expected to in up in court. You did your due diligence, you read the statistics saying that most franchisees were satisfied with their businesses, and you were confident that you could make your franchised outlet a success.

If your franchise is struggling, you are not alone. Building a successful business is not easy, and many franchisees find out that their relationships with their franchisors ultimately do more harm than good. As a result, they end up looking for a way out before their franchise agreement expires, and this often means exploring their options for litigation.

Franchise Dissatisfaction: When Should Franchisees Take Legal Action?

Of course, even under the most contentious of circumstances, full-blown courtroom litigation is generally a means of last resort. There are more-amicable alternatives available, and these will often offer more cost-effective and mutually-beneficial opportunities for resolution. That said, the issues that spur alternative dispute resolution (ADR) methods and litigation are generally the same, and dissatisfied franchisees should take the time to gain a clear understanding of all of the options that are on the table.

If you are facing a dispute with your franchisor or seeking a way to terminate your franchise, the following are some examples of some potential grounds for legal action:

  • State and federal disclosure violations, including inaccurate or incomplete information in a Franchise Disclosure Document (FDD)
  • Imposition of illegal price-fixing arrangements and other illegal competitive restrictions
  • Improper refusal to renew or consent to transfer of a franchised outlet
  • Selective enforcement of franchisees’ contractual obligations and other discriminatory practices
  • Territory encroachment and other franchise agreement violations

However, before getting too far down the road to litigation, it is important to remember that many franchise agreements include provisions for “mandatory arbitration.” If your franchise agreement includes a mandatory arbitration clause, you will need to assess: (i) whether the clause is legally enforceable; and, (ii) if so, what the requirement to arbitrate means for asserting your legal rights.

Additional Resources for Franchisees Considering Legal Action

Taking legal action against a franchisor can have serious implications, and it is not a matter to be taken lightly. For additional information about the considerations involved in initiating arbitration or litigation against a franchisor, we encourage you to read:

Questions? Contact Us for a Free and Confidential Consultation

To learn more about your options if your franchise is struggling and you believe your franchisor is to blame, you can schedule a free consultation at the Goldstein Law Firm. With more than 30 years of franchise litigation experience, attorney Jeffrey M. Goldstein represents franchisees nationwide. To schedule an appointment, please call (202) 293-3947 or inquire online today.

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