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What are some common franchise disputes?

On Behalf of | Sep 8, 2023 | small business law | 0 comments

Many people in New Jersey who want to start a new business will choose to purchase a franchise.

Using a franchise means that the business gets brand recognition and other financial and business support from the franchisor.

The tradeoff is that the business, called the franchisee, has to compensate the franchisor for its support. The franchisee also has to follow the franchisor’s rules when it comes to how the franchisee runs its operation.

A franchise agreement is the type of contract which spells out the relationship between the franchisor and franchisee. These agreements can be very different depending on the franchisor and franchisee involved.

Even through the contract is drafted well, there can still be franchise-related disputes.

  • A common dispute is when a franchisor believes that franchisee is unstable or is not profitable. Sometimes, the franchisee may not be meeting its financial obligations to the franchisor.
  • There can be other disputes over the terms of the agreement.
  • On the flip side, a franchisee may feel compelled to initiate legal action if the franchisor is not providing the support for the franchisee that it promised.
  • There can be disputes over a franchisee’s use of the franchisor’s trademarks and other intellectual property.

Are there ways I can protect my business from disputes?

Disputes with a franchisor can do a great deal of a harm to a franchise business. In the worst case, it can mean the franchisee has to close shop.

The best way for a franchisor to avoid a costly dispute is to make sure that they negotiate and review their franchise agreement carefully. In some cases, it may be better to walk away from a deal than to enter into an unfavorable contract.

Should a dispute develop, a franchisee should make sure they understand their legal options early on in the dispute. Knowing the best way to respond can in the long run cut down on legal risk and save a franchisee resources.

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