What causes franchise disputes?
- Miscommunication: the franchisor tells the master franchisee area developer franchisee one thing but master franchisee/area developer/franchisee hears what they want to hear.
- The franchisor wants to continue to improve the brands competitive position by making system changes. The franchisees resist change because of the implementation costs.
- The franchisor wants to maximise system market coverage and promote competition between stores. The franchisee resists intra-system competition.
- The franchisor wants system-wide uniformity. The franchisee resists because they believe this will not improve their profitability.
- The franchisor does not provide adequate ongoing training and support.
- The franchisor makes representations that do not come to fruition.
- The franchisee exits the system and works in a similar business, leveraging off their experience and insight into the franchisors business, possibly in breach of post- term covenants.
- The development schedule is not complied with by the master franchisee/area developer.
- There are disagreements over the quality of inputs and stock. Franchisees want to source cheaper products while the franchisor wants standardisation of quality which may require more expensive inputs. There may also be difficulties in importing products from the franchisor’s home country to the target country. While in some instances, the target country may stipulate that local products must be used.
International Franchise Law: the World is Yours
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