by Leonard A. Bellavia, Esq.
To help maximize business efficiency, it is crucial for you to “control the controllables” that relate to your business.
One such “controllable” is the franchise agreement between your business and a franchisor. At the time you plan to enter into a franchise arrangement, you are probably thinking more about the new opportunity than how future disputes or poor relationships may or may not harm your business. Many businesses do not plan on having a hostile relationship with a franchisor or ever facing a threat of termination. While these thoughts may not have crossed your mind, they certainly have crossed the mind of the franchisor. Franchisors draft franchise agreements with the knowledge and experience of years of dealing with issues that arise in their business relationships with franchisees. Franchisors try to foresee possible conflict and then tailor the franchise agreement to help them resolve the conflict in their favor. The franchise agreement may become a bludgeon used to pressure you to purchase unwanted inventory or equipment under threat of termination of your franchise or the placement of competitors close to your business.
There are certain legal concepts, like the implied covenant of good faith and fair dealings, which apply to all contracts. You should not rely solely on legal constructs like the implied covenant of good faith to protect your interests when a conflict arises. Your best opportunity to protect your business is before you sign the franchise agreement. You can negotiate some of the more onerous provisions of the agreement and shield your business from the franchisor taking steps like those mentioned above.
While no individual can control the economic fortunes or challenges our nation faces, you can strive to control how more predictable relationships may impact your business. Steps taken upfront and prior to signing the franchise agreement can reduce or eliminate many future conflicts that may arise.
As always, our firm is ready to answer any questions you may have and help you protect your interests when negotiating new franchise agreements with a franchisor or any other agreements that may bind your business in an unfavorable way.
If you are planning on entering into a franchise agreement, or are having issues with your franchisor, please call us at 631-224-7000.