A significant percentage of established companies allow other business owners to use their brand (name and idea). Franchising offers numerous benefits for start-ups, especially those entering highly competitive industries. However, disputes between the franchisor and franchisee can arise in the future, eliminating the chances of enjoying these benefits.
The following are three factors that can contribute to such disputes.
Communication issues cause most franchise disputes. For a franchise to be successful, the franchisor and franchisee need to communicate effectively. The franchisee should be adequately informed about the business’s culture, how to promote the franchise, how to recruit employees and so on. If the franchisor fails to provide information they agreed they will, the franchisee may struggle.
A franchisor may mislead a franchisee. For example, when they fail to inform the franchisee about the existing marketing condition, only for them to find out profits are not as high as projected after signing the agreement. Further, cases of franchisors misleading franchisees about their return on investment (ROI) have been reported.
Lack of funds
Some franchisors agree to directly provide franchisees with funds to manage business costs or help them get loans from lenders. If a franchisor doesn’t keep its side of the bargain, a franchise can fail, and, in turn, the franchisee may conflict with them. And in some cases, this can make a franchisee breach the contract to save their business, which can lead to more issues.
While most franchisors offer franchisees the best experiences, some don’t. The franchisor you partner with may fail to act in your best interest, leading to disputes. If this happens to you, avoid making rash decisions like breaching the contract or exiting the partnership. Instead, get legal help to make informed decisions.