Jun 21, 2019 - Blog, Franchise Articles by |

As a franchisee, many aspects of the franchise relationship can seem unfair. The longer you own your franchise, you are likely to realize how truly one-sided the relationship really is, and there is a good chance that you will grow increasingly frustrated with the power that your franchisor wields over your business.

But, from a legal perspective, when are a franchisor’s practices considered “unfair”?

Unfair franchise practices provide franchisees with a legal cause of action against their franchisors. However, the legal definition of an “unfair franchise practice” is limited, and not every complaint will justify arbitration or litigation. Examples of unfair franchise practices include:

1. Supplier and Sourcing Restrictions

Franchisors are well within their rights to designate suppliers for products and services and impose other sourcing restrictions on their franchisees. After all, uniformity is one of the hallmarks of franchising. However, what franchisors cannot do is impose undue restrictions that harm franchisees to the franchisor’s financial gain. For example, if similar-quality products are available from multiple suppliers, it may be an unfair franchise practice for the franchisor to mandate that franchisees pay more to a supplier that offers a rebate to the franchisor.

2. Price Control

Under state and federal antitrust laws, franchisors are prohibited from using their “market power” to dictate prices in individual markets. While proving that a franchisor has sufficient market power to control local prices can be a challenge, if your franchise is struggling because you cannot charge a reasonable price for your goods or services, then your franchisor’s price controls may be legally “unfair.”

3. Franchisee Discrimination

Similarly, while there are legitimate reasons why a franchisor may choose to treat two franchisees differently, there are limits as to the lengths to which franchisors can go when it comes to franchisee discrimination. Additionally, there must be a legitimate business purpose to justify any disparate treatment. If there is not a legitimate justification for why you are being treated less-favorably than other similarly-situated franchisees, then you may have a claim for an unfair franchise practice.

Importantly, unfair franchise practices are not the only grounds upon which franchisees can take legal action against their franchisors. From disclosure violations and franchisor fraud to territory encroachment and other breaches of the franchise agreement, there are numerous potential grounds for lawsuits against franchisors. If you are suffering as a franchisee and you believe that your franchisor is to blame, you should speak with a franchise litigation attorney to find out if you have a legal cause of action against your franchisor. Even if full-blown litigation is not a viable option, there may be other ways that an attorney can help you enforce your legal rights.

Contact National Franchise Litigation Attorney Jeffrey M. Goldstein

Jeffrey M. Goldstein is a franchise litigation attorney who has more than 30 years of experience exclusively representing franchisees and dealers. If you would like more information about your options for taking legal action against your franchisor, you can call 202-293-3947 or contact us online for a free initial consultation.

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