Franchise Dispute Resolution Attorneys

Representing Franchisees in Business Conflicts | Houston Franchise Dispute Attorney

Are you a franchisee struggling with a franchise relationship that's not working out as promised? You're not alone. 

At Hendershot Cowart P.C., our experienced business litigation team has over three decades of experience helping franchisees and franchisors navigate complex legal disputes. We understand that franchise relationships can deteriorate, and when they do, having knowledgeable legal counsel can make all the difference in protecting your investment and business interests.

Common Franchise Disputes We Handle

Breach of the Franchise Agreement

Franchise agreements are complex legal documents that define the rights and obligations of both parties. When either party fails to fulfill their contractual obligations, it can lead to significant business disruptions.

Our team has extensive experience representing clients in breach of contract disputes involving:

• Failure to deliver on promised training, support, or marketing
• Issues with marketing tools, intellectual property, or software systems
• Encroachments into your franchise territory or competing distribution channels 
• Product supply or quality control issues
• Misrepresentation as to cost and associated expenses of operations and startup

Franchise Disclosure Violations or Misrepresentations

The Franchise Disclosure Document (FDD) is designed to provide prospective franchisees with the information needed to make an informed investment decision. Misrepresentations or omissions in this document can form the basis for legal action. 

We help franchisees who have been misled by:

• Inaccurate financial performance representations
• Undisclosed litigation history
• Hidden costs and fees not properly disclosed
• Misrepresented territorial rights or protections
• False statements about franchisee success rates
• Misrepresented systems performance and quality of goods and services

Improper Implementation of System-Wide Changes

Most franchise agreements contain provisions that expressly allow the franchisor to make system-wide changes, including updating operations manuals, technology systems, and brand standards. These provisions typically grant the franchisor broad discretion to modify the system.

But when a system change is unreasonably expensive, technically unfeasible, or disproportionately burdens the franchisee, there might be grounds to challenge it. 

Territorial Encroachment

When a franchisor appears to encroach on a franchisee's territory, the first step is to review the franchise agreement with an attorney who will look for specific language regarding: 

• Whether you have exclusive territorial rights
• The precise geographic boundaries of your territory
• Any exceptions or carve-outs for the franchisor
• Any provisions about system expansion or development

Right of First Refusal for Adjacent Territories Not Honored

A right of first refusal (ROFR) for adjacent territories is often included in the franchise agreement to protect existing franchisees and incentivize their growth. If the franchisor fails to honor this provision, the franchisee could lose out on valuable expansion opportunities and potential market share. 

Our attorneys can review the relevant provisions and help the franchisee enforce their contractual rights.

Denial of Renewal

When a franchisor doesn't renew a franchise agreement, the franchisee's options to preserve the business depend on the terms of the agreement and the circumstances of the non-renewal. 

If the non-renewal violates any terms of the franchise agreement (such as specific renewal conditions, notice requirements, or franchisor obligations), our attorneys can work with the franchisee on a legal strategy to protect their contractual interests. Even if the agreement is silent on the topic or allows for non-renewal, negotiation is still a viable option.

Wrongful Franchise Termination

We defend franchisees facing wrongful termination and work to secure proper remedies. This includes challenging any deviations from contractual procedures, such as ensuring you received proper notice of alleged breaches and were given the chance to fix issues before termination occurred.

Legal Grounds for Terminating a Franchise Agreement

You may have grounds to exit your franchise agreement if:

• The franchisor has committed a material breach of the franchise agreement
• Fraudulent misrepresentations were made in the Franchise Disclosure Document (FDD)

Our attorneys carefully analyze both your franchise agreement and the FDD to identify discrepancies between what was promised and what was delivered. We'll help document these breaches to build your strongest case for termination.

How to document breaches or misrepresentations by the franchisor:

Building a strong case for termination requires thorough documentation:

• Document your communications with the franchisor pointing out breaches or violations of the FDD and asking them to cure. These don’t have to be written letters; emails or recorded video or teleconference meetings can serve as evidence, too.  
• Keep records and receipts of actual costs compared to FDD representations
• Compile records of support requests that went unfulfilled
• Keep accurate and up-to-date financial records showing the impact of franchisor failures

We'll help you gather and organize this crucial evidence to support your termination claim.

Is the non-compete provision enforceable if the franchisor breached the agreement first?

Whether a franchisee remains bound by a non-compete provision after the franchisor breaches the agreement depends largely on the specific language in your non-compete clause. 

If your non-compete states it applies "after termination for any reason," this creates a significant hurdle to being released from the restriction. That said, even with this language, our attorneys have successfully freed franchisees from non-compete obligations after franchisor breaches. 

Potential Consequences of Breaking a Franchise Agreement

Before making any decisions about terminating your franchise relationship, make sure you understand the potential financial implications so you and your attorney can weigh the risks before you make the decision to walk away from a franchise agreement:

• Liquidated damages provisions may require payment of estimated future royalties
• Personal guarantees could put your personal assets at risk, not just business assets, even if you have an LLC in place. 
• Ongoing lease obligations for your commercial space may continue even after termination
• Non-compete restrictions could limit your ability to earn a living in your field or utilize existing assets, such as warehouse space and customer relationships, for your next business venture

Our team will review your specific agreement to assess your financial exposure and develop strategies to minimize these consequences while fighting for your interests.

Negotiated Exit Strategies

Sometimes the best solution to a franchise dispute is a negotiated exit that works for both parties. In our experience, the success of mutual termination negotiations often depends on your specific circumstances, including:

• How long you've been operating the franchise
• Your location relative to the franchisor's core markets
• The financial health of your franchise 
• Your documented communications regarding breaches or misrepresentations

Our law firm has extensive experience negotiating favorable termination agreements – leveraging legal claims against the franchisor and applicable laws to minimize financial penalties and non-compete restrictions.

Alternative Dispute Resolution for Franchise Conflicts

Most franchise agreements contain specific dispute resolution provisions:

• Mandatory arbitration clauses often prevent traditional lawsuits
• Forum selection clauses may require proceedings in the franchisor's home state
• Mediation may be required before arbitration can commence

Our attorneys are experienced in all forms of franchise dispute resolution and will guide you through these processes efficiently while fiercely protecting your interests.

Non-Compete and Post-Termination Restrictions

Franchise agreements typically contain restrictions on a franchisee's ability to compete after the relationship ends. These provisions must be reasonable in scope, duration, and geographic area to be enforceable. 

We help clients:

• Assess the enforceability of non-compete clauses
• Defend against overreaching restrictions
• Navigate post-termination obligations
• Protect business interests when transitioning out of a franchise
• Challenge non-compete provisions when the franchisor has breached the agreement

Selling or Transferring Your Franchise

Unlike selling an independent business, when you sell a franchise, you're bound by the franchise agreement, and most agreements contain specific provisions regarding a franchisee's right to sell their franchise to exit the agreement. 

Here are the key elements typically found in these provisions:

• Written approval from the franchisor is typically required and may be withheld without cause unless your attorney negotiated language that says consent will not be unreasonably withheld before you signed the agreement. 
• You generally cannot be in breach of the agreement at the time of transfer. When reviewing franchise agreements on the front end, our attorneys often negotiate language stating that the franchisee must be given notice and an opportunity to cure any breaches before rejecting the transfer request. 
• Transfer fees can be substantial
• The franchisor may have first right of refusal, which often gives the franchisor the option to purchase the franchise at the same price and terms they've negotiated with a potential buyer.

Our franchise attorneys can facilitate the sale or transfer process by reviewing the agreement, handling all correspondence with the franchisor to ensure proper notice is given and deadlines are met, and helping structure and negotiate the sale or transfer terms – whether the buyer is the franchisor or a third party.

Having experienced counsel on your side can help ensure that all legal requirements are met to avoid potential grounds for the franchisor to block the transfer and to significantly streamline what can otherwise be a complicated process.

Take the First Step Toward Resolution

Don't continue struggling with a franchise relationship that isn't working. Contact our franchise dispute attorneys today for a confidential consultation to discuss your options and develop a strategic plan forward.

Call (713) 897-8040 or complete our online contact form to schedule your consultation.