Franchising can be a highly effective way to scale a brand or step into business ownership with reduced risk. But when things go wrong, disputes can escalate quickly — draining time, money, management focus and damaging relationships across the network.
Many franchising disputes are avoidable. In fact, the Court’s encourage parties to engage in Alternative Dispute Resolution (‘ADR’) and most franchise agreements will have a clause aimed at this. Franchise disputes often arise not from bad intentions, but from unclear drafting, inconsistent enforcement or a breakdown in communication. Understanding where the fault lines lie — and addressing them early — is key to protecting both the brand and the commercial relationship.
Common franchise disputes trouble spots
- Standards and performance obligations sit at the top of the list. Franchisors rely on uniformity to protect brand value, while franchisees can feel pressure from targets, specifications, and compliance demands. Problems arise when KPIs, service levels, or refurbishment requirements are not clearly defined or applied unevenly across the network.
- Territory disputes are another frequent trigger. Where territorial rights are unclear, the opening of a nearby competing outlet of the same franchise, the growth of online sales or the use of delivery platforms can quickly lead to allegations of encroachment. Digital channels can blur the line between local exclusivity and national reach.
- Fees and financial transparency regularly cause friction. Royalty calculations, marketing contributions and technology charges can feel opaque if not clearly explained and enforced. Disputes are far more likely where reporting is inconsistent or not sufficiently detailed or sums are not used for their intended purpose.
- Supply chain restrictions and pricing controls can be contentious, especially in periods of rising costs. Franchisees may push back on approved supplier lists or minimum purchase requirements while franchisors remain focused on safeguarding quality and brand reputation.
- Renewal, termination, and post‑termination restrictions are common battlegrounds. Arguments often centre on whether renewal is automatic or conditional, whether breaches can be remedied and how non‑compete and non‑solicitation clauses operate after exit. These disputes can escalate rapidly.
- Training, support, and site selection also feature heavily. Franchisees may feel let down if support does not match expectations or a site underperforms, while franchisors often rely on careful drafting to show that guidance was not a guarantee.
The impact of Ellis v John Benson Ltd
In August 2025, the case of Ellis & Ors v John Benson Ltd [2025] EWHC 2096 (KB) (“Ellis”) sharpened the focus on how franchise relationships are operated in practice. In Ellis the High Court held that (on the specific facts of that case) the franchise agreements in question contained implied duties of good faith and fair dealing, despite there being no express good faith clause. The franchisor’s conduct in that case breached those implied obligations.
The court found that the relationship of that franchise had features akin to an employment contract, including a high degree of control, dependency and limited exit rights.
The decision does not mean that all franchise agreements will automatically be subject to good faith duties. The Judge made it clear in Ellis that every case turns on its own facts and the facts in that case were “particular and peculiar and not necessarily frequently replicated”. However, it is a warning shot. Where franchise arrangements are highly restrictive, lack transparency or are enforced aggressively, courts may be more willing to scrutinise both the contract terms and the franchisor’s behaviour.
In practical terms, Ellis increases the importance of proportional enforcement, clear justification for control measures and consistent treatment across the network. How contractual powers are exercised can matter just as much as what the contract says.
Whether you are a franchisor protecting your brand or a franchisee navigating operational challenges, early legal advice can make a significant difference. To discuss franchise disputes, contact Lynsey Smith or explore our franchising services page here.