Franchise relationships are often described as partnerships, but legally, they are contracts. When issues arise, they can be complex, costly, and emotionally charged. Below are some of the main legal problems that franchisees face. If you are a franchisee encountering any of these issues, Runyowa Law can help you prevent or resolve them.
Franchisees often discover that they did not receive full and accurate disclosure before they signed the franchise agreement.
Franchisors are expected to provide a comprehensive disclosure document before the parties sign the agreement. This document should include material facts, financial statements, and details about any ongoing litigation. A failure to comply can give franchisees the right to later rescind the agreement and sue for damages. Franchisors must ensure their disclosure documents are complete, regularly updated, and delivered in strict compliance with any applicable law. If you believe that your franchisor did not provide you with full disclosure, contact Runyowa Law.
Franchisees often complain that their franchisor makes unilateral changes to pricing, suppliers, or operations without consultation or compensation. Even when franchise agreements grant wide discretion to the franchisor, courts may intervene if that discretion is exercised in bad faith or unfairly. Sudden shifts in branding, technology, or pricing policies, especially if they erode profit margins, can result in litigation. Franchisors must maintain clear contract language, carefully document changes, and consult with franchisees where applicable. If you believe that your franchisor has unilaterally changed your contract terms, contact Runyowa Law.
Franchisors may wrongfully terminate, decline to renew, or interfere with their franchisee’s operations. Franchise termination can be a legally complicated. If done improperly, it can lead to lawsuits, amount to breaches of fair dealing duties, or amount to constructive dismissal. Disputes can also arise when franchisors open new locations too close to existing franchises, or favor certain franchisees over others. If you feel that your franchisor is freezing you out, is unfairly favouring other franchisees, or treating you unfairly,contact Runyowa Law.
Encroachment, online sales, and changes in territory often create conflict between franchisees and franchisors. With the rise of e-commerce and delivery apps, territorial exclusivity is no longer as clear-cut as it was in the past. Franchisees may find themselves losing business to nearby locations or to the franchisor’s online store. If the franchise agreement is vague about territory or digital rights, this can lead to conflict. Franchisees must clearly understand the scope of their territorial protection (if any), and protect their interests accordingly. If you believe that your franchisor is competing with you or undermining your territorial rights, contact Runyowa Law.
Franchisees often take legal action based on alleged franchisor’s misrepresentations about expected earnings, foot traffic, or sales volumes. Vague or overly optimistic earnings representations can amount to negligent or even fraudulent misrepresentation, especially when they are undocumented. Disclaimers alone are not always enough. Franchisors should only share accurate, substantiated data and track what was communicated during the franchise negotiations. If you believe that your franchisor misled you about the franchise’s business prospects, contact Runyowa Law.
Franchisee allegations of bad faith, unfair dealing, or retaliation can quickly escalate into legal action. All Western Canadian provinces recognize a duty of good faith and fair dealing in franchise relationships. Franchisors must not act arbitrarily, retaliate against complainants, or ignore franchisee’s legitimate concerns. Common triggers for disputes include the franchisor withholding approvals, delaying payments, or failing to respond to grievances. Such disputes can cause the franchisee monetary loss and needless stress. If you believe that your franchisor is ignoring your complaints or retaliating against you for speaking up, contact Runyowa Law.
Franchisors sometimes charge excessive fees for marketing, advertising, technological service (e.g. internet), and other expenses. Often, advertising and marketing results do not match the franchisee’s financial investment. In many cases, franchisors are not transparent about how they are spending these monies, whether they are paying related third-parties or securing kick-backs for using these overpriced services. As a franchisee, you deserve transparency regarding such services and all fees you are paying to the franchisor. If you are facing franchise fees that appear excessive, especially considering the financial return you are making in new business, contact Runyowa Law.
The information on this website is for reference purposes only. It does not constitute legal advice or a contract for legal services with Runyowa Law Professional Corporation. If you need formal legal advice in a covered practice area, please contact Runyowa Law Professional Corporation at 1-306-206-2800
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