Being the owner of a franchise business can seem simple on the surface. Many people buy franchises thinking that they will have the freedom to run the business on their own terms, but owning a franchise comes with constraints. The contracts that franchisors and franchisees enter into are unique and can present some pitfalls for either side.
Franchise agreements are “relational contracts.” This means that much of it is left incomplete because the outcomes are dependent upon a relationship of mutual trust between the franchisee and the franchisor. Since the terms of the contract aren’t completely made clear from the outset, both parties should enlist the protection of a franchise attorney.
The most common issues that arise between franchisees and franchisors include:
- System Changes – A franchisee wants to make changes to increase the brand’s competitiveness, but the franchisor is not willing to pay for these changes.
- Miscommunication – The franchisor and the franchisee don’t see eye to eye.
- Intra-system competition – the franchisee may want to create competition between other franchisees that the franchisor is not willing to engage in,
- Uniformity – The franchisor may want all franchisees to do everything in the same way, but the franchisees wish to have individuality.
- Lack of Support – The franchisor may fail to provide necessary training.
- False Promises – The franchisor may have made promises that weren’t carried out.
- Breaches – The franchisee may breach the agreement by owning and operating a competing franchise.
- Schedule Delays – The franchisee may be forced to wait for postponements in development or construction.
- Product Sourcing – Franchisees may want to substitute less expensive products that the franchisor believes will compromise the quality and reputation of the business.
Many franchisees believe that they can save money by simply trusting the franchisor when they enter into the contracts, but that may be more costly in the long run. A franchise attorney can not only negotiate the terms of the contract but should also be called upon to evaluate the feasibility of the venture before any decisions are made. That in itself may prevent losing money on a failed investment.
Many people want to start a new business and have high expectations, but the reality is that franchise businesses face many challenges. Franchise legal services like Warren S. Dank Esq. P.C. are qualified to provide guidance and protection for franchisors and franchisees.