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As a franchisee, you are part of a network with other businesses working under the same umbrella. If you are experiencing complications with your franchisor, can you seek aid from other franchisees? Whether you can depends on your unique circumstances. Therefore, this article will provide some background and discuss whether you should work with other franchisees to resolve franchisor issues.

How the Franchising System Works

When you purchase a franchise and become a franchisee, you sign a franchising agreement that sets out both you and your franchisor’s obligations. They will offer you support and resources according to their franchise structure, such as:

  • training;
  • operating and management systems;
  • information networks and similar resources;
  • intellectual property and other branding assets;
  • marketing strategies;
  • trade secrets;
  • location scouting; and
  • coordination of group purchases.

In return, you will pay them varying franchise fees, likely including a startup fee and ongoing payments. Your franchisor manages the overall system while you deal with your business’s day-to-day running. How much control they give you over the business will depend on the franchisor, but you may be able to negotiate this when signing the franchise agreement. Crucially, you sign a contract with your franchisor, so your legal relationship is with them, not other franchisees.

Engaging With Other Franchisees

Depending on the nature of your franchise system, other franchisees could be a powerful source of information and resources for your own business. If your franchisor holds joint seminars or training sessions, you likely will meet and interface with other franchisees at such events. Take the chance to establish connections with other franchisees, as you may be able to exchange ideas and support each other. Especially if you are a new franchisee, you can take the chance to learn from more experienced franchisees.

For instance, in a food-based franchise, other franchisees may have insights about the best way to prepare food products for sale. 

In particular, the extent to which you engage with other franchisees will likely depend on:

  • whether you are competing with one another;
  • whether you have existing relationships with franchisees;
  • the setup of your franchise system; and
  • the chances for collaboration within your business.

However, you need to be careful that any engagement with other franchisees does not amount to cartel conduct. Ensure that you avoid discussing how you set your prices or manage output.

Resolving Franchisor Issues Together

If you are having misgivings about your franchisor or dealing with certain problematic issues, other franchisees may be a good source of information. You may find that you are experiencing the same problems, and that the franchisor is causing common issues across the franchise. However, if you want to work together to resolve these issues, you need to be careful about how you do so.

For instance, if a franchisor is not following through on their promised obligations for multiple franchisees, this is an issue that they should address. Such problems may include:

  • insufficient training or a failure to provide promised training;
  • inadequate marketing services based on the fees you pay for them;
  • problems with product supply or quality, or the manufacturers you source them from; or
  • a lack of satisfying returns upon your investment into the franchise, based on what the franchisor promised you when you purchased the franchise.

For some issues, it may be better for you to negotiate a better position collectively. You may have a stronger case together, and the franchisor may be more inclined to listen to you. If you do receive legal advice, you may also be able to share the costs of this. 

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Things to Consider

However, working together with other franchisees may not be appropriate in every situation. Your legal relationship is with your franchisor, and your circumstances may differ from other franchisees. Some differences may include:

  • your franchisee status, such as being a master franchisee;
  • how long you have been with the franchise;
  • what negotiations or concessions took place when you signed your franchise agreement;
  • what information you have access to; or
  • what information the franchisor shared with you as part of the franchise disclosure document.

Therefore, your rights and obligations may be different to other franchisees. Additionally, your franchise may operate under a different context than other franchisees, meaning that you do not have the same problems. Such context may relate to:

  • location;
  • your operating systems; or
  • choice of suppliers.

For instance, if you are experiencing hardships due to the location of your franchise, that is a characteristic unique to you. Other franchisees may not be experiencing the same issues, so it likely would not be beneficial to take action collectively.

Key Takeaways

Other franchisees can be a valuable source of resources and information. In some cases, it may be beneficial to work together to resolve franchisor issues, and you can work on a united front. However, collaboration may not be the best option for you in others.

If you need help with franchisor issues, our experienced franchising lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

What is a franchise?

A franchise is a kind of business operation/management system. A franchisor manages the overall business, while franchisees deal with the day to day running of their local installations running on the same system.

Can I work with other franchisees to deal with franchisor issues?

In some cases, working with other franchisees to negotiate with a franchisor may be advantageous, such as those where you share a common problem. In others, it may not be in your best interests, so it is best to seek legal advice where possible.

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

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