Franchisor and Franchisee Litigation Attorneys
Franchising is a legal and business development arrangement that confers responsibilities and benefits on both the franchisor and the franchisee. When the arrangement is a good fit and well considered both parties will benefit from the arrangement. That is, the franchisee can benefit from the power and draw of a respected and established brand. Furthermore, the franchisee can often leverage the advertising, administrative, and managerial resources the franchisor may provide or coordinate. The franchisor can benefit through the low-risk, and swift expansion of chain dispersal. Franchise fees can also provide resources for further business development.
However, misunderstandings and miscommunication can sour the relationship and lead to perceptions of broken promises on both sides. In other instances, the business model may no longer be a good fit. In still other instances the runaway success or impending failure of the franchising arrangement can spur a multitude of issues. The experienced commercial litigation attorneys of Meredith & Narine are dedicated to enforcing contractual agreements for both franchisees and franchisors.
Common Legal Problems Faced by Franchisors
The most common reason why a franchisor would need to take legal action against a franchisee is practical and simply a necessary part of business. Some franchisees who are faced with financial difficulties may attempt to delay or avoid the payment of the franchise fee which may include payments for marketing and royalty fees. If a franchisee continues its failure to pay, the franchisor may consider taking legal action to recover the money, terminate the franchise, or both. A terminated franchisee that continues to use the franchise trade dress or intellectual property is likely to face further legal action to cease such improper use.
In other instances, a particularly troublesome franchisee who refuses to abide by franchise standards may rise to such a level that legal action is warranted. While franchisors do not take the legal and non-legal costs of suing a franchisee lightly, it can sometimes be necessary to enforce uniformity and consistency of franchise operations. In other scenarios, the lawsuit may seek to forbid the franchisee from continuing to engage in practices or procedures that could subject the franchise, as a whole, to legal action or reflects poorly on the organization.
Common Legal Claims by Franchisees
Claims that may be made against the franchisor by a franchisee are significantly more varied. Common legal problems faced by individual franchisees include:
- Franchisee termination – Franchises are an investment. However, some franchisors may feel that the relationship is not a good fit and move to improperly terminate the franchise or fail to renew despite the satisfaction of an obligation to do so. A franchisee can incur significant costs and related damages due to improper termination. However, if the termination is proper the franchisee must take steps to avoid further legal action including removing instances of franchise trade dress and trademarked or copyrighted material.
- Breach of exclusivity provisions or encroachment – A franchise agreement may contain provisions providing exclusivity in a certain area that may or may not be subject to certain time constraints. If the franchisor encroaches on exclusivity, the franchisee may experience loss of sales or customers and experience significant monetary damages.
- Insufficient or Misleading Franchise Disclosures – While Pennsylvania does not have its own laws and regulations concerning the franchisor-franchisee relationship, FTC rules apply. Part of the FTC rules require the franchisor to make certain disclosures at least 14 days before an intending or renewing franchisee can sign.
- Lease or real estate claims – Depending on the terms of your franchise agreement, claims may arise due to a franchisor’s or property management company’s interference into your lawful business activities. Failure to maintain the premises for business purposes or take corrective action can burden a franchisee.
- Expansion concerns – A successful franchisee may look to expand the franchise or to open additional franchises. Working with an experienced attorney can help the franchisee avoid unnecessary complications or problems in the business relationship.
Many other legal issues can arise for the franchisee including problems created by third parties and independent contractors, vendor agreements, business structuring and financing concerns, and liability issues.
Experienced Business Litigation Attorneys Provide Franchisor & Franchisee Representation in Pennsylvania
While franchising agreements can often lead to significant efficiencies and benefits for both franchisee and franchisor, not every arrangement is successful. When difficulties in the business relationship result in the treat of legal trouble or litigation, the attorneys of Meredith & Narine can provide experienced and strategic representation for both franchisors and franchisees. To discuss how our firm may be able to represent your business call our firm at 215-995-2769 or contact us online.