October 09, 2023
You’ve invested significant time, money, and effort into building your franchise business. You followed the rule book, worked diligently, and expected the franchisor to do their part. But then, conflicts arise—unresolved disputes that become roadblocks in your journey to success.
If you are a franchisee who is having a dispute with your franchisor, you may be wondering if you can sue them. The answer is not always straightforward, and the path to legal action is both complex and layered. As business attorneys in McAllen, we often counsel clients on the intricacies of franchise law, helping them understand the options they have when disputes escalate beyond resolution.
Why Disputes Occur
Before diving into the legal possibilities, it’s crucial to understand why franchise disputes happen. The reasons vary, and here are some of those…
- Operational disagreements can arise if the franchisor mandates specific suppliers that are more expensive than local options, impacting your profits.
- Royalty disputes often occur when there’s a disagreement over the percentage of sales owed to the franchisor, affecting your financial planning.
- Territorial conflicts can emerge if the franchisor allows another franchise to operate within the area that was supposed to be exclusive to your business.
- A breach of contract happens when either party fails to fulfill any term agreed upon in the franchise contract, such as the franchisor not providing advertised national-level support.
The franchise agreement, usually a comprehensive and lengthy document, serves as the governing law between the franchisee and the franchisor. However, even with detailed agreements, conflicts can and do occur.
The Path to Legal Action
If you find yourself in a dispute, the first step is usually mediation or arbitration, as most franchise agreements stipulate these methods as a preliminary conflict-resolution measure.
According to a study published in the Journal of Business Venturing, nearly 52% of franchise-related disputes are resolved through mediation and arbitration (Journal of Business Venturing, 2019).
However, when these paths fail to yield a satisfactory outcome, legal action becomes an option worth considering.
State and Federal Laws
Franchise relationships are primarily regulated by both federal law, such as the Federal Trade Commission (FTC) Franchise Rule, and state laws which may vary. While federal laws provide a uniform standard, many states have enacted laws that offer additional protections for franchisees.
For instance, Texas franchise law grants the right to franchisees to associate with other franchisees and prohibits franchisors from restricting this right.
Filing a Lawsuit
If you’re at a point where litigation appears to be the only way forward, consult with business attorneys in McAllen TX to understand the complexities involved. A lawsuit can be filed for various reasons including, but not limited to, a breach of contract, misrepresentation, or fraud.
Before filing a lawsuit, you’ll need to gather substantial evidence to build your case. This may involve collecting email correspondences, financial records, and other forms of documentation that support your claims.
Litigation is both costly and time-consuming. The expenses involved range from attorney fees, court fees to potentially paying the opponent’s legal costs if the judgment is not in your favor. Given these stakes, it’s crucial to assess the potential risks and benefits before proceeding.
What You Should Do
Disputes in franchise relationships are, unfortunately, not uncommon. While mediation and arbitration are often the first steps in dispute resolution, there are instances where these methods are insufficient. At that juncture, the legal route becomes a viable option, albeit one that comes with significant costs, both financially and emotionally.
If you find yourself grappling with a franchise dispute, consult with knowledgeable attorneys in McAllen, Texas, who can help you weigh your options carefully. The complexities of franchise law require nuanced understanding and adept handling.
At Villeda Law Group, we offer comprehensive legal guidance to help you navigate through these intricate matters, safeguarding your investment and business interests. It’s not just about the possibility of suing; it’s about making informed decisions that serve your best interests.
So, if you’re in a difficult spot with your franchise, don’t navigate the legal maze alone. Reach out to us, your trusted business attorneys in McAllen, TX, and let us help you find the best course of action tailored to your unique situation.
Contact Villeda Law Group today to schedule your consultation and take the first step in resolving your franchise dispute.