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Adeptly Guarding Your Business’s Interests

Owning a franchise has benefits, but problems can arise

On Behalf of | Jun 27, 2019 | Business Litigation

Entrepreneurs who want to run their own business might prefer buying a franchise instead of starting their own companies.

Franchises offer numerous benefits: a proven blueprint to follow to run a successful business, brand recognition, a better chance of success, help with marketing and training support.

But once you hand over thousands and thousands of dollars to become a franchisee, you still must follow all corporate rules.

That was shown recently when Massachusetts-based Dunkin’ filed lawsuits against several franchisees in an effort to stop them from running their restaurants after the company had terminated their franchise agreements.

Dunkin’ filed suit against operators of nine franchisees in Pennsylvania and Delaware, alleging they failed to properly check the work credentials of their employees. Dunkin said that upon reviewing employee hiring documents, the company found violations and moved to terminate franchise agreements over what was termed “pervasive noncompliance” with federal employment law. The company reported “no employment documentation or incomplete documentation for a substantial portion of the employees’ files.”

The company also sued several operators in two other states in April.

Franchisees contend in a counterclaim that Dunkin’ terminated the agreements “without compensation, and without affording any opportunity” to fix the violations. They accuse the company of trying to reclaim the stores and sell them without repaying the franchise holders.

Disputes between companies and their franchisees are unfortunate, but they do occur. Franchisees should have an attorney who can review corporate regulations, offer advice to make sure all rules are properly followed and step in to defend them when they have been accused of wrongdoing. Owning a franchise is a huge investment, and nothing should be left to chance.

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