Most commercial litigators would tell you that litigating a franchise dispute is no different than litigating any other commercial dispute. Like most business relationships, the relationship between a franchisor and franchisee is generally governed by a written agreement. How different can a franchise case be?
Actually, a franchise case can be very different. The business and legal underpinnings of a franchise relationship are uniquely complex and must inform counsel’s approach to the litigation and, more specifically, trial. In this article, we provide a brief summary of the business and legal foundations of the franchise relationship and offer our suggestions on how best to leverage the various aspects of the franchise relationship at trial.
What Is Franchising?
Franchising is a means of establishing a network of independently owned businesses that sells products or services under a common brand name and trademark. It is a system of marketing and distribution in which an independent business (the franchisee) is granted—in return for a fee—the right to market the goods and services of another (the franchisor) in accordance with the franchisor’s established standards and practices, and with its assistance. The economic underpinnings of franchising center around brand names and the public’s perception of quality and uniformity associated with those brand names. Through franchising, the economic burdens of establishing a regional, national, or international chain are shared between the franchisor and its franchisees.