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Your Rights as a Franchisee

by Robert Tom
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When buying a franchise, it’s important to be aware of your rights as a franchisee. There are certain protections to safeguard you from mistreatment by the franchisor. In this post, you learn your rights and explain what you can do if the franchisor violates them. Stay informed and empowered when investing in a franchise!

What Are Franchisee Rights?

The American Association of Franchisees and Dealers (AAFD) published a Franchisee Bill of Rights, which outlines the basic rights of franchisees. According to this document, all franchisees have the right to:

  • Freedom from coercion: Franchisors cannot coerce you into signing a contract or renewing your agreement. They also cannot require you to purchase goods or services from them.
  • Receive accurate and complete information: Before you sign a contract, the franchisor must give you a disclosure document containing the franchise information. This includes the franchisor’s business experience, litigation history, and financial statements.
  • Associate freely: Franchisees have the right to form or join organizations to advocate for their rights. Franchisors cannot retaliate against franchisees who exercise this right.
  • Be treated fairly and equally: Franchisors must apply rules and regulations evenly to all franchisees. They cannot show favoritism or give preferential treatment to certain franchisees.
  • Have contracts honored: Once you’ve signed a contract, the franchisor must uphold their end of the agreement. This includes providing the promised support and not changing the contract without your consent.
  • Not be terminated or excluded without cause: Franchisors can only terminate or exclude franchisees for a valid reason, such as violating the contract terms. They cannot do so arbitrarily or capriciously.
  • Have a voice in decisions that affect them: Franchisees should be involved in decisions that could significantly impact their business, such as changes to the franchise system.
  • Receive a fair hearing: If there’s a dispute between the franchisor and franchisee, both parties should have an opportunity to present their case. The resolution should be made in good faith and be reasonable.

What to Do If Your Rights Are Violated

If you feel that your franchisor has violated your rights, you can take a few steps.

  • Talk to the franchisor: The first step is to resolve the issue directly with the franchisor. This can be done informally by talking to the franchisor or representative. If you’re not comfortable doing this, you can send a formal letter outlining your concerns.
  • File a complaint: If you’re unable to resolve the issue directly with the franchisor, you can file a complaint with the Federal Trade Commission (FTC) or your state’s attorney general. The FTC enforces the Franchise Rule, requiring franchisors to provide potential franchisees with certain information before signing a franchise agreement. You can also reach out to the International Franchise Association (IFA) for help. The IFA is the oldest and largest organization representing franchising worldwide. They offer resources and support for franchisees, including a dispute resolution process.
  • Consult an attorney: You may also want to consult and hire a franchise dispute lawyer to help you understand your legal options.

Buying a franchise can be a great way to start your own business. But as with any major purchase, it’s essential to do your homework and know your rights before signing on the dotted line.

Exercising Your Rights

As a franchisee, you have certain rights protected according to Franchise Grade, the franchises law. However, exercising those rights can be difficult t. Here are some tips on how to effectively exercise your franchisee rights:

  1. First, if you have a dispute with your franchisor, you should try to resolve it through mediation or arbitration. If that doesn’t work, you can always consult with a lawyer or attorney specializing in franchisor-franchisee disputes.
  2. Second, keep in mind that as a franchisee, you have the right to terminate your franchise agreement if you feel that the franchisor is not living up to its obligations. However, before doing so, you should first give the franchisor a chance to cure the problem.
  3. Third, you also have the right to sell your franchise. However, franchisors typically have the right of first refusal, so you will need to notify the franchisor of your intention to sell and allow them to match any offers you receive.

By understanding and exercising your franchisee rights, you can help ensure that your franchising relationship is positive.

Common Franchisor-Franchisee Disputes

As any franchisor or franchisee knows, disputes can arise between the two parties. While some franchisors and franchisees can work out their differences without legal intervention, others find that they need to hire a lawyer or attorney to help them resolve the dispute.

Common franchisor-franchisee disputes include disagreements over the contract terms, the franchisor’s failure to provide adequate support, and the franchisee’s failure to pay royalties or adhere to the franchisor’s standards. While these disputes can be difficult to resolve, it is important to remember that both parties have a vested interest in reaching a fair and equitable resolution. With the help of an experienced attorney, franchisors and franchisees can reach a resolution that satisfies both parties and helps preserve the franchisor-franchisee relationship.

 

 

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