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Not all franchise offerings are the same. Some franchise sellers load their contracts with language that gives them an unfair advantage, while others offer a more balanced contract. Signing an unfair contract does not mean your business will fail, but it stacks the odds against you.
All franchise contracts favor the franchisor, but some are worse than others. Only an attorney with experience reviewing and writing these contracts can tell you whether a particular franchise contract is worse than expected. If it is, you might be better off buying a different franchise.
Nobody should buy a franchise without having the contract reviewed by an experienced franchise lawyer. In a recent federal court case, we represented a man who bought a franchise in Ohio without hiring an attorney, and who subsequently lost all his money on the business. The contract required disputes to be arbitrated in Atlanta, and whoever brought the claim had to pay all the arbitration costs up front. That would have required my client to deposit $25,000 or so up front just to bring his claim, and he didn’t have the money to do that.
Our client had a good claim for recovery of his losses under Ohio law, but the court decided he had to bring his claim by arbitration in Atlanta. Even though the court agreed with us that the arbitration clause was unreasonable, they decided he had an obligation to read the contract or hire an attorney to do so. We think the court got this decision wrong, but it illustrates the risk of signing a franchise contract without an understanding of what it says.
Buying and operating a franchise requires a large investment of time and money. That investment can be jeopardized when differences occur with your franchisor. Your contract is written to favor the franchisor in any dispute. Franchisors will tell you they want their franchisees to succeed, and they only enforce their contract rights when the franchisee leaves them no choice. But disputes can sometimes arise for reasons that are not entirely the franchisee’s fault. For example, the franchise owner or a key employee may dislike a particular franchisee, or may decide to enforce a requirement against one franchisee when they’ve ignored similar facts for other franchisees.
Franchisors sometimes use the threat of expensive litigation to bully a franchisee, but in most cases they prefer to avoid litigation if possible. Most disputes are settled even when a lawsuit is filed. But to achieve an acceptable settlement, the franchisor has to take your legal representative seriously. Mr. Dub is regularly consulted by other attorneys as an expert on Franchise Law, and he has represented many franchisees in resolution of their franchise disputes. If you are a franchisee in need of lawyer who can provide serious legal representation, contact us today.
Franchisees are not permitted to terminate their franchise agreement, and even when their agreements expire, the non-competition language prevents them from operating a similar business near the site of the former franchise. In some cases, however, franchisees can beat the odds and arrange to exit their franchise systems, based on violations of state disclosure laws, or breaches of contract or misrepresentation by the franchisor.
Mr. Dub has arranged for dozens of franchisees to leave their franchise systems without liability or non-compete obligations. In some of these cases, the franchisee was even able to recover a cash settlement from the franchisor.
Are you a franchisee in need of a top lawyer?
Law Office of Stanley M. Dub
20600 Chagrin Blvd, Ste 600
Cleveland, Oh, 44122
(216) 991-4480
