What To Do When A Franchising Deal Goes Bad

Black Enterprise:

Unfortunately, with some regularity, a franchisee’s relationship with his franchisor goes bad. The franchise may be losing money, the franchisee may not be receiving support promised by the franchisor, or the franchisee may have learned that the franchisor failed to properly register the franchise or disclose key facts material to investment in the franchise. Regardless of the circumstances, you should consider certain steps when a franchise goes bad.

Contact the franchisor directly
First, call the franchisor, reasonably and rationally address your concern and see whether they can offer any proposed solutions. You do not want to escalate a minor dispute into a major disagreement that can bring an end to your franchise relationship, unless such escalation is truly necessary.

Consult your franchisee association or ombudsman
Some franchisee associations are officially created by the franchisor, and some are independent of the franchisor. By inquiring with these franchisee associations, you may learn that other franchisees are experiencing problems similar to yours. You may strengthen your bargaining position by having multiple franchisees approach the franchisor jointly, as opposed to individually, about a common problem. Also, many larger franchise systems have ombudsmen to troubleshoot disputes within the franchise system. These ombudsmen can help communicate with your franchisor and resolve disputes.

Review the dispute resolution clauses in the franchise agreement. Continue reading.