- Front Page
- Biz Tools
Franchisees often ask how much they can win in a lawsuit with a franchisor. The answer depends on many factors, including the type of wrong the franchisor committed and the nature of the loss you sustained.
The outcome of any particular case will depend heavily on the facts. There are two basic ways to determine damages: restitution and benefit of the bargain.
Restitution attempts to put you back into the position you were in before your involvement with the franchisor. It is determined by the value of your investment in the franchise, plus any losses, and less any profits.
This way of measuring damages is often used in fraud cases, where you claim that the franchisor defrauded you into purchasing the franchise.
Benefit of the bargain
The other way to measure damages is called the benefit of the bargain. This involves looking at what the franchisor promised. For example, a franchisor tells you that the training has a value of $10,000. If the franchisor fails to provide that, you could recover the difference between what you actually got and $10,000.
Using the benefit of the bargain to measure damages is also effective when a franchisor makes representations of profits at a particular level.
In the U.S., the general rule is that franchise attorney fees are not recoverable. However, many franchise statutes give franchisees a right to the fees.
It's important to note that 98 percent of all civil cases settle before going to trial. In a settlement, the parties usually compromise. The damages you receive tend to be less than what they might have been at trial. Settlements offer certainty, and you end up with money in your pocket.
As a wise franchise lawyer once said, "A bad settlement is better than a good lawsuit."