For franchisees, pursuing franchise arbitration can often be the best (and only) option for resolving contentious disputes with their franchisors. Not only is arbitration generally less costly and time-consuming than litigation, but franchise agreements frequently include “mandatory arbitration” clauses that prevent franchisees from asserting their legal rights in court.

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Arbitration is an alternative dispute resolution (ADR) process that is designed to be neutral while also being less expensive and less time-consuming than litigation. While the arbitration process achieves these goals in most cases, it is important to put the neutrality, cost and duration of arbitration into context. While the arbitration process is facially neutral, franchisors can (and do) take steps to sway the process in their favor. Additionally, while arbitrating a dispute may be less costly and less time-consuming than going to court, franchisees still must often think carefully about whether it is truly worth moving forward.

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As a franchisee, the majority of your legal rights are determined by your franchise agreement. This includes your right to take legal action against your franchisor. Most franchise agreements include dispute resolution clauses, and many of these clauses require franchisees to submit their disputes to franchise arbitration.

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While building a franchise system used to be a long-term endeavor, it is becoming increasingly common for companies to establish franchise systems in order to sell out and move on. We have seen several reports of franchisors selling relatively “young” systems in recent years; and while franchisor founders may say that their decisions are driven by doing what is best for their franchisees, the reality is that selling out offers both a substantial payday and the ability to avoid ongoing risk related to the operation and management of the franchise system.

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Illinois is one of relatively few U.S. states that have adopted both a franchise disclosure law and a franchise relationship law. These laws provide statutory protections to prospective and current franchisees; and, when franchisors violate these laws, franchisees have certain rights even if these rights are not spelled out in their franchise agreements.

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If you have been exploring franchise opportunities, you have likely discovered that all franchisors have a Franchise Disclosure Document (FDD) that looks fairly similar. But do you know why this is the case? It isn’t because franchisors want to make disclosures or simply copy their competitors, but rather because the FDD is required under a set of federal regulations commonly known as the “FTC Franchise Rule.”

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When buying a franchise, comparing competing franchise opportunities is an important part of the due diligence process. Too often, prospective franchisees choose a brand they want to pursue, and then they pursue it without gaining an understanding of whether there are better opportunities available.

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According to the International Franchise Association (IFA), Illinois is the fastest-growing state in franchising. The IFA’s recent 2023 Franchising Economic Outlook highlights the 10 fastest-growing states in terms of franchise establishments, franchise employment and franchise output—and Illinois tops the list in all three categories.

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The International Franchise Association (IFA) recently released its 2023 Franchising Economic Outlook. Developed in partnership with FRANData, the Franchising Economic Outlook is the IFA’s “annual study . . . detailing the franchise sector’s performance for the past year and projected economic outlook for the year ahead, as well as an in-depth state outlook for all 50 states and Washington, D.C.”

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As a franchisee, there may come a time when you want to sue your franchisor. This can happen for a variety of reasons, and it can happen at virtually all stages of the franchise relationship. But, should you sue—and can you? Answering these questions requires the advice and representation of an experienced franchise attorney.

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