We Help Franchisees Change Franchise Systems Through Associations and Class Actions

There is strength in numbers. The issue you might be facing as a franchisee is often a systemwide issue or one facing all the franchisees in an area. And while franchisees can feel like their voices aren’t heard when they are isolated, they can get the results they need by joining together.

At Luther Firm, PC, we are well versed in litigating issues both on behalf of franchisee classes and franchisee associations. By litigating on behalf of the entire system or multiple franchisees, we have the leverage to impart real change to a franchise system.

Understanding the Economics

For any business, the decision to proceed to litigation isn’t an easy step to take. Litigation is expensive, and the fact there is no guarantee of success can make litigation feel like you’re gambling with your company’s future. But, unfortunately, there can be times where litigation is your best option to protect your business’s future.

We work closely with our clients to help them understand the potential costs involved and then develop a cost-effective litigation budget. One potential advantage to association or class action litigation is that the members can share litigation costs and expenses. Another advantage is that a class action or association case allows franchisees to bring claims that wouldn’t be financially worthwhile if brought on an individual basis. If the potential costs and expenses associated with litigation are an area of concern, an experienced franchise attorney can explain how being a member of a class or association can help.

Class Actions vs. Association Lawsuits

Both of these can be very powerful, effective means to bring legal action to get the relief you need. First, however, it is essential to understand the difference between the two.

Class Action Lawsuit

To proceed with a class-action lawsuit, you will need to file your case in federal or state court and be certified as a class by a judge. In order to be certified as a class, you will need to meet several requirements, including that your claim is typical of other franchisees, and the class action lawsuit will adequately serve the interests of the entire class.

The uniformity in franchising often makes a class action a viable path for a franchise owner to bring claims. Antitrust, advertising funds, and contract claims, where a similar franchise agreement has been used, are often amenable to class treatment. Misrepresentation claims also may be amenable where based on the franchise disclosure document or commonly used sales materials. Whereas if the misrepresentations are based on one salesperson’s statements, it may be an issue limited to a few franchisees.

We can analyze and determine whether your issue is one that affects just a few franchise owners or one that could affect upward of fifty or more and therefore could be a candidate for a class action. We also will look at whether the claims vary or depend on a franchisee’s individual circumstances. As to large system-wide issues, a class action can often be the most effective tool to obtain relief.

Association Lawsuit

An association lawsuit is one that a franchisee association files on behalf of its members. An association lawsuit can provide franchisees a way to obtain declaratory relief under the franchise agreement. In these situations, a court can determine whether the association or the franchisor’s interpretation of the franchise agreement is the correct one. Association lawsuits also can be an effective way to obtain injunctive relief. In these situations, a court can stop a franchisor from taking certain actions against individual franchisees or the entire system.

While it may not be as powerful as a class-action lawsuit in the ability to obtain damages, an association lawsuit may present several other advantages. It can be brought on behalf of a smaller franchise system than a class action. There is also no legal requirement of unanimity which can make association lawsuits viable even where there are small variations in the franchisees’ claims.

In many situations, an association and an individual franchisees’ lawsuits can be brought at the same time, allowing the parties to split the cost and expense of the lawsuit. This can allow the association to obtain relief and the individual franchisees to obtain damages.

Even if an association is not prepared to file a separate lawsuit, the association may be able to fund your lawsuit. Associations can fund individual lawsuits as test cases to create change in a franchise system. So even if the association is not prepared to file a lawsuit, working with the association can often allow you to reduce or eliminate your cost of litigation. An experienced franchise association attorney can help you understand your options and decide which one is best for you.

A Franchise Attorney with Deep Litigation Experience

Our founder, Doug Luther, began his career at Global 100 law firm Sheppard Mullin and then moved on to the well-known litigation firm Glaser Weil. He has represented Fortune 500 companies in complex, multi-million dollar cases. If you are considering either a class action or an association lawsuit, Mr. Luther brings the knowledge and depth of experience you need.

We Are Ready to Assist Your Franchisee Association or With a Class Action

When litigation is your last remaining option, you need an aggressive franchise attorney on your side. We start by working with you to identify your options and then develop an effective strategy to accomplish your unique goals. Whether you are in Orange County, San Diego, Los Angeles, Northern California, or beyond, to discuss your case and how we can help, call or email us today to schedule a consultation.

A Franchise Attorney Who Understands Supplier Restrictions Can Help Franchisors and Franchisees Deal With Challenges and Find Solutions

Purchasing a franchise offers several attractive opportunities for people looking to start a business. You have the benefit of starting a business under an established brand with a good reputation and quick access to customers. In theory, you and the franchisor have a mutually beneficial relationship, which results in the franchisor approving vendors or suppliers that either provide premium products or services to franchisees are provide them at a competitive price.  Franchisors can use their scale to negotiate great deals for franchisees but these relationships don’t come without their challenges. 

Franchisors and their Approved Suppliers and Vendors

One of the main challenges for franchisors is establishing a strong group of suppliers and vendors to provide products and services for its franchisees.  Vendors often do not understand franchising and may not understand that any approved supplier or vendor agreement controls its behavior as to franchisees.  This can cause vendors to charge franchisees prices or provide terms that are inconsistent with what was negotiated. In worse circumstances, suppliers can cause issues because the services or products they provide lack quality or have issues that cause repercussions in the franchise relationship.  It’s important for franchisors to be proactive and where necessary take action against those parties.  

A Challenging Dynamic For Franchisees

Franchisees on the other hand have supplier restrictions, which are limitations on what vendors franchisees can work with and what items franchisees can buy. The franchisor wants to ensure the product served by their franchisees is of uniform quality and at a consistent price. As a result, the franchisor often becomes the sole supplier for various products used in your franchise system or limits the suppliers that a franchisee can utilize. While this may seem to simplify your supply chain and ensure the consistent quality of your product, it can also act to your detriment. You may find yourself stuck using products or services that are of subpar quality or at above-market prices. We can work with you to bring these issues to the franchisor’s attention and negotiate better solutions. Or in some situations, we can litigate those issues by bringing contract or fraud claims based on franchise relationship laws.

Franchisors will always take the position that franchisees are obligated to purchase their products and services according to the terms of the franchise agreement. While this is generally true, this does not necessarily mean that franchisees have no recourse. At Luther Firm, PC, we help our clients successfully resolve issues related to supplier restrictions.

The Value of Working with a Skilled Negotiator

Franchise attorney Doug Luther served as general counsel to a franchisor and has deep experience as a dealmaker in various business contexts. His background gives him a unique insight into how franchisors and suppliers think, what they are motivated by, what problems they need to solve, and where there is room for negotiation. Our experience on both sides of the table helps us get results that many others cannot.

When Negotiations Fail—An Attorney Who Understands How to Litigate Supplier Restrictions Can Help Franchisees

Unfortunately, negotiation cannot resolve some supplier restriction disputes. Franchisors will often take the position that the issue is cut-and-dried, but this is rarely the case. You do not have to let your business suffer simply because your franchisor is unwilling to deliver the quality you need for your business to thrive.

We start by reviewing the supplier restrictions in your franchise agreement and operations manual. That agreement may obligate the franchisor to provide products or services of a certain quality. Alternatively, the franchise agreement may not be consistent with applicable franchise relationship laws. Whatever the case may be, we’ve helped our clients successfully resolve supplier restrictions by bringing breach of contract claims, fraud claims, or other claims asserting the franchisor has failed to meet their legal obligations.

A Franchise Attorney Can Resolve Supplier Disputes

Supplier issues and restrictions are some of the most difficult challenges franchisors and franchisees can face. Fortunately, you have options. If you’re dealing with supplier issues or restrictions, we can review the situation and help you understand your options. Whether you are in Orange County, Los Angeles, San Diego, Southern California, or beyond, contact us to schedule a consultation to discuss your case and how we can help.