Breach of Contract

A breach of contract within a franchise agreement can involve unpaid royalties, non-compete disputes, advertising fund disagreements, supplier restrictions, or other contractual violations. An experienced franchise attorney can evaluate the agreement, determine whether a breach occurred, and help protect your legal rights before the dispute escalates.  

How Can A Franchise Lawyer Help You Navigate a Breach of Contract?

Franchising is built on agreements. There is of course the franchise agreement between franchisee and franchisor but also contracts with suppliers, business partners and customers. Therefore, it pays to have a franchise lawyer who knows those contracts inside and out and how courts have interpreted them. Luther Lanard PC experience litigating almost any type of contract issue a franchisee or franchisor may encounter.

In many cases, the Franchise Disclosure Document (FDD) and franchise agreement together provide important context for evaluating whether a franchisor or franchisee has breached their contractual obligations. 

Common Franchise Agreement Breach Disputes 

We frequently litigate franchise agreements on behalf of both franchisors and franchisees. Many disputes begin with a notice of default, making early legal review important before deadlines expire or additional remedies become available. 

Examples of franchise agreement cases that we have successfully handled include disputes over:

• Royalties;
• Advertising and marketing fund;
• Non-compete clauses;
• Restrictive covenants;
• Supplier restrictions;
• Customer exclusivity;
• Encroachment; and 
• Franchisor acquisitions.

Many franchise agreements also include cure periods that allow the alleged breaching party an opportunity to correct certain contractual violations before termination or litigation. 

For franchisees, you might think the franchise agreement is one-sided, and you wouldn’t be wrong. But that doesn’t mean that the franchisor has immunity for its actions. Franchise agreements are long and complicated documents. But that can work in your favor because it only takes one term or provision to have a viable lawsuit. 

Even in areas where franchisors are provided discretion, often that discretion is not limitless, and franchisors must exercise it in good faith. That means a franchisor often has to have a valid business reason for exercising its discretion. If the franchisor has an ulterior motive or has exercised its discretion in a way detrimental to franchise owners, there might be a breach of the implied covenant of good faith and fair dealing. At Luther Lanard, PC, we can evaluate and help our clients know whether the franchisor is in breach of an explicit contractual provision or an implied covenant. 

Courts often evaluate whether both parties acted in good faith and dealt fairly throughout the franchise relationship when resolving contract disputes. 

Resolving Internal Franchise Business Disputes 

One of the most sensitive issues a franchisor or franchisee might face is an internal dispute. People often go into business before finding out that their skill sets are not compatible or that they seek different things out of a business. While unfortunate, after starting a business, people can find out that they don’t have the right partner and either need to exit the business or force another partner or shareholder out.

This can be a delicate situation where it pays to have an attorney that, if needed, can help salvage the relationship while navigating the legal issues. The benefit of involving a lawyer early on is helping the parties understand the state laws that govern their business entity or what restrictions are in place in their agreements. Once the parties fully understand the legal issues, it often can be easier to find a solution that works for all parties. Depending on the franchise agreement, disputes may proceed through mediation, arbitration, or traditional litigation before reaching a final resolution. 

If litigation can’t be avoided, we are there to guide you through that process. We have substantial experience dealing with partnership and shareholder disputes. We can assist with resolving and litigating these claims, whether based on a partnership, member or shareholder agreement, or state corporate law. Our proactive and aggressive approach to litigation can result in the other party settling or mediating early in the case.

Talk to a Franchise Breach of Contract Attorney 

A breach of contract can threaten the stability and future of your franchise business. Whether you received a notice of default, believe the franchisor has breached the agreement, or are facing litigation, Luther Lanard can evaluate your franchise agreement, explain your legal options, and help protect your business. Contact our franchise attorneys today to schedule a consultation.