Franchising is the granting of a license by a franchisor to a franchisee, which entitles the franchisee to operate their own business using the franchisor’s brand, systems, knowhow and business model. It is a close relationship under which the franchisee receives initial training and, crucially, ongoing support to establish a previously untrained person in the business.
When a dispute between franchisor and franchisee arises the stakes can be high. For a franchisee the franchise can be his entire livelihood. Most franchise agreements contain non-compete and compulsory sale clauses, which bite when the agreement ends meaning that a dispute may lead to the loss of a franchisee’s business without compensation. For the franchisor if a dispute undermines brand and knowhow it will risk the whole foundation of the franchise, severely hindering the franchisor’s ability to retain or recruit other franchisees. If not handled carefully, a dispute with one franchisee can often expand into a dispute with several franchisees or the entire network.
Sarah Murray, Partner and Nicola Broadhurst, Head of Franchising, provide further advice in an article published in Acquisition International Magazine.
To read the article in full, please click here.