Do You Have a Claim Against Your Franchisor?
As a franchisee, there are few things worse than coming to the realization that you may need to sue your franchisor. Unfortunately, for many franchisees, this is reality, and taking legal action is the only way to protect their investment and their legal rights.
If you are at the point of considering franchise litigation, this article provides an overview of potential causes of action that franchisees can assert against their franchisors. To find out what claims you may have available, we encourage you to contact us immediately for a free consultation.
Common Claims in Franchise Litigation
Franchise Disclosure Violations
Under federal law and the laws of various states around the country, franchisors owe a duty to provide timely and accurate disclosures to potential franchisees. These disclosures must be made in the form of a Franchise Disclosure Document (FDD), which, depending on the state where you live, may need to be registered before the franchisor can begin selling franchises. Some common forms of franchise disclosure violations include:
- Your franchisor failed to provide you with an up-to-date FDD
- Your franchisor sold you a franchise too soon after providing you with its FDD
- Your franchisor included misrepresentations or exaggerations in its FDD
- Your franchisor underestimated the initial investment to open your franchise in Item 7 of the FDD
- Your franchisor provided an inaccurate or unsubstantiated “financial performance representation”
Breaches of the Franchise Agreement
While most franchise agreements are fairly limited in terms of establishing affirmative obligations for the franchisor, there are still typically several ways in which franchisors can breach the terms of their agreements. Some of these include:
- Your franchisor or another franchise encroached on your territory
- Your franchisor stopped providing products, services or support
- Your franchisor used marketing fund fees for other purposes
- Your franchisor wrongfully refused to renew your franchise
- Your franchisor wrongfully terminated your franchise agreement
Unfair Franchise Practices
In addition to committing disclosure violations and breaching the terms of the franchise agreement, franchisors can also be held liable for a variety of other unfair franchise practices. These practices vary widely and implicate a wide variety of state and federal laws, so it is critical that you discuss your situation with a highly experienced franchise litigation attorney:
- Accepting undisclosed rebates from vendors
- Acting in bad faith (even if not technically in breach of the franchise agreement)
- Antitrust violations
- Discriminating against individual franchisees
- Violating franchise, industry-specific and other state and federal laws
Of course, this is just a small sampling of the virtually innumerable claims aggrieved franchisees may have against their franchisors. If you believe that your franchisor has violated the law, violated your franchise agreement or otherwise acted improperly, it is important that you act quickly to protect your rights.