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Breach of contract actions spawned by franchise disputes

On Behalf of | Aug 22, 2014 | Business Litigation |

Franchise agreements often result in business disputes between the seller of the franchise (franchisor) and the franchise purchaser (franchisee). There is often an ongoing tension between the two entities due to their different interests in furthering and complying with a franchise agreement. Breach of contract actions frequently come up in this area of the law, nationwide and in North Carolina.

There have been an increasing number of franchisees who have complained of being driven out of business by the franchisor. They often allege that the franchisor unfairly cancels the franchise agreement by imposing increasingly burdensome requirements on the business owner. This has even resulted in calls for protective legislation to make it harder for franchisors to cancel franchise agreements.

The question of franchise enforcement and the power struggles between franchisors and franchisees is an ongoing debate in most states. Fast food franchisors, for example, complain that loosening restrictions on franchisees will result in lower food quality and unclean establishments. Franchisees argue against the imposition of requirements that have become increasingly costly to establish and maintain.

In some states, legislation has been passed making it tougher for franchisors to cancel an agreement. In some other states, such legislation is being introduced and debated. Some bills make it easier for the franchisee to sell the business where economic pressures are too much to handle. Other provisions may limit the extent and nature of the requirements that franchisors can impose.

In North Carolina and other states, franchise disputes continue to produce breach of contract litigation. It is advisable for a business owner or investor who is considering a franchise purchase to consult with a business attorney to make sure that all rights are duly protected in the negotiating and drafting of the documents. Where a problem arises regarding an existing franchise agreement, the same professional assistance early in the dispute can be of critical importance in protecting the business owner’s position.

Source: The Washington Times, “Assembly passes bill expanding franchisee rights“, Fenit Nirappil, Aug. 14, 2014

Source: The Washington Times, “Assembly passes bill expanding franchisee rights“, Fenit Nirappil, Aug. 14, 2014