Oct 31, 2022 - Blog, Franchise Articles by |

According to a recent article in the Franchise Times, a group of Cell Phone Repair franchisees has sued the franchisor’s parent company alleging that it misled them into incurring substantial additional costs. As reported, the franchisees allege that the franchisor’s parent company—Assurant, which insures cell phones and other mobile devices—promised to send insured customers to their franchised outlets for covered repairs. However, after franchisees invested in preparing their stores to manage this additional volume, the plaintiffs allege that Assurant reversed course and decided to handle these covered repairs in-house.

Ultimately, the Franchise Times reports that Assurant decided to uphold its promise after the franchisees filed suit. But this type of situation is not uncommon, and it raises an important question for franchisees in all franchise systems: If your franchisor misled you, should you sue?

Suing a Franchisor for Fraudulent Misrepresentations

Deciding whether to sue your franchisor for fraudulent misrepresentations requires consideration of a variety of different factors. First and foremost, you will need to decide: Is it worth it?

In the Cell Phone Repair case discussed above, it appears that the franchisees incurred material financial costs as a result of Assurant’s alleged misrepresentation. They invested in their franchises in anticipation of getting more business. Then, when it appeared that this additional business was not forthcoming, they apparently found it worth it to sue in an effort to recover their losses.

Franchisors make misrepresentations all the time—both during and after the sales process. This is an unfortunate reality of the franchise industry, and it is also unfortunate that, for many franchisees, holding their franchisors accountable simply isn’t worth the time and resources involved. Franchisors know this, and too often they use it to their advantage.

But, in some cases, taking legal action will be worth it—and holding a franchisor accountable may even be necessary to protect franchisees’ investments. When this is the case, misled franchisees will also need to consider factors such as:

  • Does a state franchise relationship or disclosure law apply? Several states have franchise laws that give franchisees the ability to pursue legal action for pre-sale and post-sale misrepresentations.
  • Is the dispute subject to mandatory mediation or arbitration (or both)? Most franchise agreements include either a mandatory mediation clause or a mandatory arbitration clause, if not both.
  • Where do franchisees need to file their lawsuit? When franchisees have the ability to sue under their franchise agreements, they will typically need to pursue litigation in the franchisor’s chosen jurisdiction and venue.
  • Can other franchisees help bear the cost (and build leverage)? If you have been misled by your franchisor, there is a good chance that other franchisees have been misled as well. If this is the case, you may be able to work as a group to collectively seek a favorable outcome.

Schedule a Confidential Consultation at the Goldstein Law Firm

If you have questions about suing your franchisor, whether individually or as a group, we encourage you to contact us for more information. To schedule a confidential consultation with attorney Jeffrey M. Goldstein, please call 202-293-3947 or send us your contact information online today.

Lawyer USA

Complex Commercial Litigation Law Firm of the Year – USA

Lawyer USA

Complex Commercial Distribution Litigation Representative

Lawyer USA

Antitrust & Franchise Law Firm of the Year – Washington DC

Lawyer USA

Best Franchise Lawyer of the Year – New York

Lawyer USA

Best for Franchise Disputes – USA

Lawyer USA

Complex Commercial Litigation Law (Franchisees and Dealers) 2021 – USA

Lawyer USA

Antitrust and Franchise Law Firm of the Year in DC

Lawyer USA

Leading Professionals in Law

Lawyer USA

Franchise Law
in the District of Columbia

Lawyer USA

Franchise Law Firm
of the Year – USA

Lawyer International

Lawyer International
Legal 100
2018

Lawyer International

Lawyer International
Legal 100
2019

ACQ5 LAW AWARDS 2019

US (New York)
Franchise Lawyer
of the Year
ACQ5 GLOBAL AWARDS 2019, JEFF GOLDSTEIN, GOLDSTEIN LAW FIRM, PLLC

ACQ5 LAW AWARDS 2019

US (New York)
Franchise Law Firm
of the Year
ACQ5 GLOBAL AWARDS 2019, GOLDSTEIN LAW FIRM, PLLC

Lawyers of Distinction logo

2020 Power Lawyers

Esteemed Lawyers of America Logo

Esteemed Law Firm Complex Litigation

Global Law Experts Logo

Recommended Firm in Franchise Litigation

Who's Who Attorney Logo

Top Attorney USA – Litigation

Avvo Franchise Lawyer Symbol

Superior Attorney in Franchising

Avvo Franchise Lawyer Symbol

Superior Attorney in Antitrust

Finance Monthly Global Award Winner Logo

Franchise Law Firm of the Year

Lead Counsel logo

Chosen Law Firm for Commercial Litigation

BBB of Washington DC

A+ Rated

Washington DC Chamber of Commerce

Verified Member

Lawyers of Distinction logo

Franchise Law Firm of the Year

ISSUU

Best Law Firm for Franchise Disputes in 2017

Law Awards Finanace Monthly

Franchise Law Firm of the Year - 2017

Top Franchise Litigator for Franchisees and Dealers

Top Franchise Litigator for Franchisees and Dealers

2017 Finance Monthly Award

2017 Finance Monthly Award

ACQ5 LAW AWARDS 2018

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2018

ACQ5 LAW AWARDS 2019

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2019

Franchise Law Firm of the Year

Franchise Law Firm of the Year

Franchise Law Firm of the Year

Franchise Law Firm of the Year
Global Awards 2017

Global Law Experts

Franchise Law Firm
of the Year
in New York – 2019

Finance Monthly Law Awards - 2018

Finance Monthly Law Awards - 2018

Franchise Law Firm of the Year

Franchise Law Firm
of the Year
Global Awards 2018

Contact Us

Goldstein Law Firm, PLLC

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

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

Free Consultation

Downtown Chicago Office

30 South Wacker Drive 22nd Floor #3341,
Chicago, IL 60606

Phone: 312-382-8327

Free Consultation

Free Consultation