If you are dealing with issues with your franchisees, you aren\u2019t alone. Disputes between franchisors and franchisees are pretty standard. Conflicts can arise over all sorts of things, from miscommunication and misaligned expectations to financial or performance issues. Your handling of the dispute is the most important thing. As a franchisor, you should tread carefully when dealing with internal conflicts, as a simple mistake can land you in hot water.<\/p>\n\n\n\n
In this article, I\u2019ll go over common causes for conflicts between franchisors and franchisees and offer tips for the best way to approach them.<\/p>\n\n\n\n
No matter how well-oiled your operation is, you will occasionally have friction in the ranks. As always, it\u2019s best to be prepared. Let\u2019s take a look at some of the most common reasons franchisors get into franchise disputes<\/a> with their franchisees. Knowing these triggers in advance will help you spot the problem before it gets out of hand.<\/p>\n\n\n\n Breaches of agreement between franchisor and franchisee are one of the biggest causes of tension in the relationship. Contract breaches can also get you embroiled in legal headaches.<\/p>\n\n\n\n You\u2019ve likely already negotiated a solid franchise agreement<\/a> with the franchisee, so you can use this contract to help you navigate disagreements.<\/p>\n\n\n\n If you or a franchisee breaks the agreement or fails to meet certain expectations, it can cause a legal dispute. Here are some examples:<\/p>\n\n\n\n The terms themselves help iron out ambiguity while clearly stating your rights and the rights of your franchisees. Many franchisors also include different ways to remedy tension in the franchise agreement.<\/p>\n\n\n\n It\u2019s good to exercise a bit of diplomacy in these situations. Before dragging in lawyers and escalating the situation, I recommend meeting franchisees face to face. You\u2019ll often find that you can come to a resolution and avoid a long-drawn-out dispute.<\/p>\n\n\n\n In any business arrangement, money is a common source of conflict. Your franchisees usually pay pretty hefty sums to gain access to your business model. If a franchisee falls behind with their ongoing royalties<\/a> or other payments, it can quickly sour the relationship. <\/p>\n\n\n\n Before you jump the gun and escalate the dispute, it\u2019s important to understand the cause of the situation. Late royalty fees could be a simple organizational issue that can be easily fixed.<\/p>\n\n\n\n Is the franchisee struggling financially? Are they deliberately withholding royalties because they feel that you aren\u2019t upholding your end of the agreement? <\/p>\n\n\n\n Disputes often arise when franchisees aren\u2019t hitting sales targets or are underperforming in another way. Monitor franchisee performance<\/a> carefully so you can spot issues quickly and before they turn into much bigger problems. Naturally, you can\u2019t let recurring underperformance slide, but an underperforming location isn\u2019t always cause for terminating an agreement<\/a>.<\/p>\n\n\n\n There is often a significant learning curve, especially for first-time franchisees, so you can\u2019t expect every unit to meet your expectations right away.<\/p>\n\n\n\n If you notice a franchise is struggling to meet expectations, offer more support or give your franchisee an extended deadline. However, if you continue to notice performance issues after having several discussions with the franchisee, you may need to consider other options. That said, if you plan on terminating an agreement, reducing territory size, or making another change to the contract, I recommend working with a franchise attorney to avoid any legal missteps that could lead to a lawsuit.<\/p>\n\n\n\n One of the most common reasons that franchisees file disputes against franchisors is due to a lack of support or training. Honestly, it\u2019s often a fair complaint. When franchisees purchase a franchise<\/a>, they are not only investing in your name or established business model, they are also expecting to receive support to help them get off the ground running.<\/p>\n\n\n\n If you fail to deliver the promised level of support, a franchisee likely has grounds to sue you or request compensation. When franchisees feel like they haven\u2019t been trained well or haven\u2019t received the resources they expected, they will become frustrated. If you don\u2019t address their concerns, this frustration can quickly multiply and turn into a full-fledged dispute.<\/p>\n\n\n Sign up for our free email newsletter. It’s a 5-minute read once a week to help you level up on the franchising industry.<\/p>\n\n\n\nBreach of Agreement<\/h3>\n\n\n\n
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Fee-Related Disputes<\/h3>\n\n\n\n
Performance Issues<\/h3>\n\n\n\n
Not Enough Franchisor Support<\/h3>\n\n\n\n
You\u2019ll need to provide the support you\u2019ve promised in your franchise agreement. At the end of the day, training your franchisees and helping them learn your operations is in your best interest. A successful franchisee will likely make more sales, which means more money in your pocket.<\/p>\n\n\n\nWant Franchising Insights Straight To Your Inbox?<\/h4>\n\n\n\n