Franchising can be an excellent way for both franchisors and franchisees to grow a business, expand into new markets, and benefit from an established brand. However, franchise relationships can also break down, often because of avoidable misunderstandings, unclear expectations, or failures to follow the franchise agreement. When disputes arise, they can be costly, disruptive, and damaging to the brand.
Our Litigation & Dispute Resolution team regularly advises franchisors and franchisees on how to prevent and resolve franchise disputes. Below, we outline the most common mistakes we see and how to avoid them.
1. Not Understanding the Franchise Agreement
The franchise agreement is the foundation of the relationship. Yet many disputes arise simply because one or both parties did not fully understand their obligations.
Common issues include:
- Misunderstanding fees, royalties, or payment schedules
- Confusion over territory rights
- Disputes about renewal or termination terms
- Misinterpretation of performance obligations
How to avoid this
Both franchisors and franchisees should seek specialist legal advice before signing. Clear explanations, written guidance, and early clarification of expectations can prevent costly disagreements later.
2. Poor Communication Between Franchisor and Franchisee
Breakdowns in communication are one of the biggest causes of franchise disputes. When concerns are not raised early, small issues can escalate into major conflicts.
How to avoid this
- Schedule regular check-ins
- Keep written records of key discussions
- Raise concerns promptly and constructively
- Ensure both parties understand operational changes
Open communication builds trust and reduces the risk of misunderstandings.
3. Failure to Follow the Franchise System
Franchises rely on consistency. When franchisees deviate from the approved model, whether in branding, pricing, suppliers, or operations, it can damage the brand and breach the agreement.
How to avoid this
Franchisees should:
- Follow the operations manual
- Seek approval before making changes
- Attend required training
Franchisors should:
- Provide clear, up to date guidance
- Offer support and training
- Monitor compliance fairly and consistently
4. Inadequate Support from the Franchisor
Franchisees often rely heavily on the franchisor for training, marketing, and operational support. When this support is lacking, disputes can arise over performance, profitability, or unmet expectations.
How to avoid this
Franchisors should ensure:
- Training is comprehensive and ongoing
- Marketing materials are accessible and effective
- Support is consistent across the network
Franchisees should communicate early if support is insufficient.
5. Disputes Over Fees and Financial Performance
Financial disagreements are common, particularly around:
- Royalty payments
- Marketing contributions
- Profitability concerns
- Unexpected costs
How to avoid this
Transparency is key. Both parties should:
- Keep accurate financial records
- Understand fee structures from the outset
- Review financial performance regularly
6. Mishandling Termination or Exit
Ending a franchise relationship can be complex. Disputes often arise when termination clauses are misunderstood or not followed correctly.
How to avoid this
- Review termination rights early
- Follow contractual procedures precisely
- Seek legal advice before taking action
A poorly handled exit can lead to claims for breach of contract, loss of profits, or reputational damage.
Need Help With a Franchise Dispute?
At Oliver & Co, we are employee owned, committed to putting our clients first. Our team can help franchisors and franchisees with all aspects of franchise disagreements, from early negotiation to formal dispute resolution.
We can help you with:
• Interpreting and understanding your franchise agreement
• Resolving disputes through negotiation or mediation
• Enforcing your contractual rights
• Managing termination or exit from a franchise
• Preventing future disputes through clear documentation and practical advice
We provide strategic, commercially focused support to help you protect your business interests and maintain strong franchise relationships.
Need advice?
If you’re facing a franchise dispute or want to understand your rights, get in touch with our team today on 01244 312306, law@oliverandco.co.uk or through the Contact Form on our website.
