Franchising is becoming increasingly popular – generating over £15.1billion for the British economy in 2015 [ according to a bfa/NatWest Franchise Survey], and employing up to a staggering 621,000 people. 901 UK franchisor brands run 44,200 franchisee outlets in the UK. That’s big business, and that’s why franchise disputes can be so expensive.
Involved in a Franchise Dispute? Don’t suffer in silence – for FREE initial legal advice simply call us now on FREEPHONE 0800 1404544 or Salisbury (01722) 422300.
Franchising disputes can be complex and very stressful. That’s why you need experienced dispute resolution specialist on your side. The head of our business dispute team, David Patterson, is a member of the Commercial Litigation Association (CLA) – the UK’s only group of expert commercial litigation and mediation professionals.
Franchise disputes – thankfully they are the exception
The good news is that recent surveys suggest that 84% of franchisees are happy with their relationship with their franchisor. While most franchisor/franchisee relationships work well, especially if the original franchise agreement was well drafted, the fact that disagreements do arise is hardly surprising given the complexity and the length of many franchise relationships.
There is a common misconception with people new to the “franchise” business model that it’s the easy way to launch a business without the legal and administrative headaches in starting a business from scratch. This is rarely the case, due to the legal regulation involved with operating a franchise.
As the franchise agreement usually determines day-to-day operations in your business, you need to look at this should any problems arise and really do need to understand your rights and obligations.
Resolving your franchise dispute
Given the cost of litigation, our team strongly recommend attempts at a negotiated settlement, and in particular the use of mediation. Civil mediation involves both parties meeting in the presence of an independent mediator who tries to find a satisfactory compromise between both parties that they can live with. It is almost always much quicker cheaper and less stressful than litigation leading to a fully contested court hearing.
Rest assured, whether you are a franchisor or franchisee, our team will support you throughout any Franchising Dispute.
Your Franchise Dispute – how we can help
Our Solicitors can help you with wide variety of disagreements including:
- Breach of the original franchise agreement – by franchisor or franchisee
- Failure on the part of either party to achieve agreed performance standards
- Issues regarding termination – when either the franchisee wants to get out of the franchise or the franchisor claims the franchisee has breached the agreement
- Lack of promised support or marketing for the franchisee
- The franchisee selling goods or services outside the franchise or setting up a competing business
- Arguments over territory. Some disputes arise because one franchisee feels another franchisee is encroaching on his territory – and the franchisor is doing nothing to stop that. Equally, sometimes there is some confusion over the exact territory involved – this should never happen however with a properly drafted and carefully considered franchise agreement
- Claims of misrepresentation – i.e. that the franchisee relied on false information provided by the franchisor when buying the franchise, e.g. with regard to sales projections, success or failure rates of previous franchises, or overheads or the profits made by other franchisees
- Fraud in the original sale or purchase of the franchise
- Allegations that the franchisee has caused some form real and lasting damage to the franchisor’s brand and reputation
- Trying to exit a franchise before the term expires. It’s not unusual for franchising to involve a fixed term period– and that can sometimes mean that if you want to exit your franchise early, you may be liable to pay compensation to your franchise. Again it’s critical you understand the terms of your franchise agreement
- Intellectual property issues – e.g. infringement or misuse of the ownership of trademarks or website and other publishing material
Why choose us for your Franchise Dispute?
- Rest assured that our team can provide the specialist franchising expertise you need
- Our Franchise Solicitors will give you a view, at the earliest possible stage, of your likelihood of success in your dispute
- Our team offer “no win no fee” agreements (often called “conditional fee arrangements”) for suitable franchising disputes. However please note that we are unable to run any commercial litigation using a no win no fee agreement where the value of the claim is £10k or less.
- Wherever your business is based , our specialists can represent you in your franchising dispute, taking your instructions by phone or e-mail without any need for you to come to our offices – although if you prefer, we can arrange 1-to-1 meetings
- We provide you with FREE initial phone advice on franchising dispute issues – just call us now on FREEPHONE 0800 1404544
Getting the right Franchise Agreement in the first place – 4 ways to avoid disputes
There is no dedicated franchise law in the UK; therefore the franchising agreement is the legal foundation used to solve any problems that arise between franchisee and franchisor. Contract law is used to interpret and enforce your particular franchise agreement – for example with regard to arguments about unfair terms and breach or termination of the contract
1.That is why making sure that you have a franchise agreement that comprehensively covers your particular situation, and is written in clear English, is essential. A clear and comprehensive agreement, fully understood by both parties, is the best way of avoiding damaging disputes.
2. If you’re a franchisee, don’t even consider signing up to a franchise without getting independent legal advice from a solicitor with plenty of franchising experience who can explain the agreement to you. It’s remarkable how many franchisees try to cut costs by doing without legal advice by entering into a long term binding agreement they simply don’t understand. That’s usually a recipe for disaster.
3. Keep to the letter of your franchise agreement – don’t take any chances in getting involved in any franchising dispute and in particular don’t give your franchisor reason to get involved in expensive franchise litigation
4. Many disputes start because of a basic breakdown of trust between franchisor and franchisee. And that’s often because their respective roles, in what is essentially a business partnership, are simply not clear enough. Don’t let that happen to you – whether you are a franchisee or franchisor, make sure you get a clear and comprehensive agreement agreed from the start.
Avoiding franchising disputes – the importance of the franchise contract
When you come to buy a franchise, you will probably find that the franchise contract is presented to you on what is, more or less, a simple take-it-or-leave-it basis – especially if the franchise is already an established and successful one.
The reason for this is fairly straightforward – understandably, most franchisors want all franchisees to be working under the same contract. However, the fact that there is usually such little wiggle room with regard to negotiating any amendments to the basic contract when buying into a franchise, can be a problem for the franchisee. That’s because most franchise agreements are usually heavily weighted in favour of the franchisor.
So our advice to all franchisees is, if you want to have the best chance of avoiding a potentially disastrous franchise dispute, make sure you really understand the terms of your original agreement, that you can live with those terms and that you are particularly careful not to put yourself in any breach of that agreement.
Dealing with potential disputes
Whether you are a franchisee or franchise all, make sure you keep an eye on the other party – especially if your franchise is a new one.
But equally, and this applies in particular if the franchise you have bought is your first business, you shouldn’t necessary blame the franchisor if your business doesn’t go stratospheric on day one. Every new business, even with an existing and well-known brand and product, takes time to build.
Franchisors should, in particular, make sure that their franchisees pay what they owe on time and follow the Franchise Agreement.
Franchisees should make sure that the franchisors provide all the promised marketing support and training – details of which should be clearly set out in the franchise agreement.
Your franchise dispute – the importance of mediation
If there is a disagreement with your franchise partner, we will assist you to try to resolve it as quickly easily and cheaply as possible. And fighting the issue out at court is not going to be quick, easy or cheap.
Fortunately the vast majority of such disputes are resolved either by negotiation or mediation. Mediation is a legal process in which an independent qualified mediator takes part in meetings with both the franchisor and franchisee – the mediator’s role is to encourage and assist a negotiated settlement. If our team are unable to resolve your disagreement through negotiation, we are likely to strongly recommend the mediated approach.
Renewing a franchise and the risk of future disputes
It’s very common for franchisees to take on a territory for a limited or fixed term. And if your franchise has been successful, then you will properly want to renew it.
But watch out. Even if you have an option to renew there are two particular things you need to watch – and getting either of them wrong could get you entangled in an expense franchising dispute.
- The option to route new may be conditional – and those conditions could involve further expense e.g. paying your franchise or for further training or updating marketing materials.
- Do not assume that the renewed franchise will be on exactly the same terms.
It is not always the case that the new franchise agreement will be exactly the same as the one you signed earlier. There are plenty of reasons why a franchisor might want to amend the core contract – perhaps to give them a better deal if the franchise has proved highly successful, or to simply to reflect improvements in franchise procedure.
Our advice is simple – whenever you look to renew any franchise agreement, always get specialist legal advice.
The parent company of my franchise is based outside the UK? Can I still sue my franchisor?
In principle, the answer is yes. If you’re business is based in England and Wales, then it’s UK law that applies. However if you have any queries about a possible dispute with your overseas-based franchisor, you should always take advice from a specialist solicitor
The importance of getting the right legal advice
If an issue arises, deal with it as quickly as possible and don’t delay in getting specialist legal advice if necessary.
Our Solicitors deal with Franchise Disputes for clients both locally in Wiltshire, Hampshire, Dorset and Somerset – and throughout England and Wales – from our offices in Salisbury, Andover, Fordingbridge and Amesbury.