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Posted on Jan 02, 2011

How to Avoid Franchisee Related Lawsuits

Nobody likes lawsuits. They’re expensive, stressful, and detrimental to business. Sometimes litigation is necessary, but many times it is not. What can franchisors do to avoid legal disputes? We asked franchise attorney John Fitzgerald, co-chair of the franchise practice at Gray Plant Mooty, a full service commercial law practice that focuses on franchising. Fitzgerald gave us these tips:

Communication is key. There should be no surprises. Before taking any new action, explain it to the franchisees. Let them know your reasons for doing it and how they will benefit. Sending out an edict saying this is what’s going to happen, “thou shalt now do it,” is what causes people to push back because it’s a surprise to them.

Invite input before making changes. It’s change that causes people to get upset and to start litigating. Before you affect the change, new standard, or new item, get the input of the franchisees. That doesn’t mean it’s a democracy or you’re looking for a consensus. Rather, you want to honestly say that you’ve talked to the franchisees and gotten their input. And it’s not just a ploy either. When you talk to franchisees, you’re likely to get some very good information because they’re living the business. They know what works in the store or unit and what doesn’t work – often better than the experts on your training staff.

Think about why you’re making changes. Whenever making a decision, ask this question: Whose business are we serving? Whatever you’re doing as a franchisor should be working to make the franchisee more successful, driving their business to get more sales which will mean more royalties for you. Remember that litigation comes from unhappy franchisees when they start pointing fingers because they’re not succeeding. For example, you might want to install a great new computer system, but unless it can really help the franchisee’s efficiency and bottom line, is it really worth it? If it’s not going to help move the business forward and you can’t justify it reasonably to the franchisee, you’re asking for disputes. You’re just adding stress to the franchisee by putting in a system with added cost.

Contact info:
John Fitzgerald (612) 632-3064
Gray Plant Mooty www.gpmlaw.com

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