No Lapdogs, Franchisees Bite Back
Bark and Fitz, a Canadian based luxury dog products franchisor, is in a legal battle with its franchisees.They "allege the company founder violated the terms of contracts they signed when joining the franchise, by essentially forcing them to carry volumes and styles of products they feel interfere with their bottom line" and "also allege the founder misused a pool of advertising funds they paid into and marked up products without telling them and making them difficult to sell."
The franchisees are trying to separate themselves from the franchisor and still tend to their clientele. Last May, the franchisees formed an association and, after talks broke down with the franchisor, they decided to halt all royalty payments.
"According to documents from an Ontario Superior Court proceeding in March, a judge found “evidence that the franchisor acted for its own financial benefit and to the financial detriment of the franchisees and thus breached its duty of good faith and fair dealing.” " - Canada's The Star
While this case is awaiting trial, the judge's "good faith and fair dealing" findings could potentially have significant ramifications for franchisors in the future. Could the Canadian Courts find that forcing franchisees to purchase marked up products and interfering with profitability be grounds for severing ties to a franchisor?