The maxim “every coin has two sides” commands applicability across a broad spectrum of matters.
And that includes, for purposes of this blog post, many business topics. Today’s entry visits quite specific commercial subject matter, namely, overview points relevant to the franchise business model.
The above coin-linked adage is relevant to the franchise universe and related laws because that realm prominently spotlights the reciprocal rights and duties existing for two distinct entities.
Those are of course a franchisor and franchisee in any given case. The instant post takes a look at franchising from the latter’s viewpoint.
Key franchising stats: evidence of the business form’s popularity
There is no question that franchised businesses are alive and well across the United States. One in-depth legal overview of American franchises tied to a recent year underscores these salient points:
- Approximately 550,000 U.S. franchises in operation
- $800 billion-plus in sales generated
- An impressive one-third of all domestic retail sales spawned by the business form
Cited commercial advantages for franchisees
The business upsides often intoned by franchisees are multiple and varied. They prominently include these positives, as noted in the above source:
- Comparative flexibility for a prospective business owner
- Capital outlays at a reduced level relative to the startup costs in many other businesses
- Opportunity from the outset to link with an established franchisor trademark
- Ready accessibility to a proven business plan and established training programs
Sometimes coupled with the upsides: franchise disputes, lawsuits
News stories of storybook endings for many franchisees are common, but far from a universal norm. As the aforementioned overview stresses, “Litigation is not uncommon in franchise relationships.” A recent report from one U.S. senator’s office underscores occasional discord in the model and franchise complications owing to problems like these:
- Mandatory arbitration imposed on franchisees seeking to lodge legal complaints
- Franchisor prerogatives to legally modify existing rules and policies
- Insisted-upon promotion schemes that a franchisee opposes based on cost and likely underperformance
- Franchisor misuse of marketing funds required of operators
- Expressed discontent of many operators concerning a franchisor’s continued and onerous intrusions into successful business operations
In a nutshell, franchising can spell an attractive opportunity for many individuals, while at the same time harboring possibilities for disputes and legal conflict. Questions or concerns regarding any matter tied to the franchising model can be addressed to a proven business law legal team well versed in dispute resolution and effective litigation strategy.
