Franchising Risks and Disputes: Insights from both sides of the fence
Franchising is often sold as a shortcut to growth or business ownership.
For franchisors, it promises scale without the capital burden. For franchisees, it promises a proven model and reduced risk.
In reality, many franchising disputes arise not because the model itself is flawed, but because expectations, incentives and commercial realities drift apart over time.
Franchising Too Early
One of the most common mistakes made by franchisors is franchising before the business is genuinely ready. Franchising too early often leads to inconsistent performance and allegations of misrepresentation.
A business that works in the hands of its founder does not automatically work as a franchise. Warning signs include systems that exist largely in the founder’s head, processes that rely on personal relationships, and profitability driven by exceptional effort rather than repeatability.
Misunderstanding the Business Demands
From the franchisee side, a common pitfall is misunderstanding what the business actually requires day to day. Disputes arise where the business requires more hands-on involvement than expected, margins are tighter than anticipated, or success depends heavily on personal resilience.
Trusting Others to Care as Much as You Do
A recurring theme in franchising disputes is misplaced trust. Franchisors often assume franchisees will care about the brand as much as the founder does. Franchisees often assume the franchisor will remain as invested as they were during recruitment.
Control, Autonomy and Friction
Franchising sits in an uncomfortable space between independence and control. Common flashpoints include supplier restrictions, pricing controls, marketing levies, and enforcement of brand standards.
Financial Stress and Underperformance
Financial pressure is a major catalyst for franchising disputes. Underperformance often leads to allegations of overstated earning potential or inadequate support.
Enforcement, Termination and Exit
Many franchising disputes arise at the point of exit rather than entry. Issues include restrictive covenants, termination for breach, and resale or transfer restrictions.
Conclusion
Franchising can be a powerful model, but it carries risk on both sides. Disputes are rarely about blame alone – they are about clarity, accountability and outcome.
We act for both franchisors and franchisees in contentious matters, including misrepresentation claims, termination disputes and enforcement of franchise agreements.
If you’re facing a franchising dispute and need a solicitor, email cclayton@longdens.co.uk or connect with Chris Clayton on LinkedIn and send him a direct message.
DISCLAIMER: The information provided on this blog is for general guidance only and does not constitute legal advice. If you require tailored legal advice, please contact us to discuss your specific circumstances.
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