Franchise disputes are a substantial source of business litigation to law firms in Florida that handle such matters. This generally consists of a disagreement between the franchiser, e.g., McDonald’s or another franchise retail chain, and the franchisee, which is the local business that uses the franchiser’s name and operates as an outlet of the franchiser. Because these disputes generally arise due to conflicting interpretations of the franchise agreement that binds both parties, the litigation usually focuses on allegations of breach of contract.
In fact, it is the franchise agreement that will generally define the terms of the relationship between franchiser and franchisee. A recent example of such litigation involves the retail fast-food chain Wendy’s and its fourth-largest franchisee, DavCo. Wendy’s is suing the franchisee for breach of the franchise agreement. The company alleges that the franchisee bought its stores knowing that there were provisions in the contract that could require remodeling of stores. Wendy’s has ordered remodeling, and the franchisee allegedly has failed to comply.
Wendy’s has also initiated a new point-of-sale system which the franchisee has apparently failed to put in place. In order to do that, franchisees are required by the contract to purchase new equipment when the franchiser says to do it. The franchisee responded to Wendy’s complaint by alleging that Wendy’s is using the franchise agreement to make a power grab to seize the stores and take them over.
The franchisee alleges that it has refused prior offers from Wendy’s to take over the stores. Furthermore, when the franchisee tried to merge with another franchisee, Wendy’s refused to accept the deal. The franchisee operates over 150 stores and has a long history with Wendy’s. DavCo claims that other franchisees are questioning Wendy’s marketing direction and are resisting similar changes, which made Wendy’s decide to sue DavCo to make an example and to force other franchisees into compliance. Franchise litigation for breach of contract over franchise agreements is also a common source of business litigation in Florida.
Source: dispatch.com, “Franchisee says Wendy’s using lawsuit to grab its restaurants”, J. D. Malone, Feb. 19, 2015