Franchising is a tried and tested business model that offers potential commercial benefits to both the franchisor and the franchisee. It’s a business model that is used by well-established multinational brands to operate globally, as well as by growing businesses as an effective way of expanding their brand through a newly established franchise network.
If you are a potential franchisor thinking about setting up a network, or a potential franchisee considering investing in one, we can help you to consider your options. We are able to offer a holistic approach to our franchising clients, with our Corporate & Commercial Team drafting or reviewing the franchise agreement and any other related legal documents, as well as advising on any potential sale or purchase of an existing franchise, and our Commercial Property Team assisting with any property-related franchising issues.
However, like with all business relationships, disputes can arise for a number of reasons. Because of the close nature of the business relationship between a franchisee and a franchisor, when a franchise dispute does arise, it can often be more acrimonious and complex than a “straightforward” contractual dispute. For this reason, our Commercial Disputes Team’s many years of practical experience in helping to resolve franchise disputes can prove invaluable when the franchise relationship does break down.
Often, a key area in dispute between the franchisee and the franchisor is which of them is responsible for the underperformance or failure of the business. The franchisor, for example, may consider that the franchisee has failed to comply with the terms of the agreement to the detriment of the franchisor’s brand as a whole. The franchisee, on the other hand, may consider that the franchisor has failed to provide the required business support as set out in the agreement.
Other times, a dispute can be more one-directional, such as where a franchisor believes that an ex-franchisee has breached the post-termination restrictive covenants in the franchise agreement by setting up a new business in competition with the franchise business. Conversely, a franchisee may consider that they have a claim for misrepresentation against the franchisor if they believe that the pre-contractual financial projections provided by the franchisor, and relied on by the franchisee, were not genuine or realistic.
Our Franchise Disputes team can act for franchisors or franchisees when a dispute arises. Often, if legal advice is sought earlier enough, a franchise dispute can be resolved before it escalates, enabling the parties to negotiate an amicable and pragmatic termination of the franchise relationship.
We can also advise on specific franchise-related issues, such as the parties’ termination rights, how a franchisor can deal with a persistently underperforming franchisee, and how the franchisor’s intellectual property rights (IPR) and brand should best be protected and enforced.
Of course, at the other end of the spectrum, if more urgent legal action is required then our franchise disputes team can also assist with, for example, applying to Court for an injunction to enforce a post-termination non-compete restrictive covenant.
Our franchise disputes team is headed up by Michael Axe, who has been recommended in the Legal 500 2021 rankings as having “an excellent knowledge of franchising, he also has a very commercial outlook and can match the legal aspects of the case with the requirements of the business”.
For more information about how we can help franchisors and franchisees with either non-contentious franchising advice or with resolving franchise disputes, please contact our franchising specialist below.