Franchises are a great way to do business, except when they’re not. When a franchise relationship turns into a legal dispute, it can be time consuming, expensive and stressful. Here’s what you need to know about taking your franchise law case to court:
Keep records of everything
“A franchise lawsuit is often a paper chase,” said Lipsitz Green Scime Cambria LLP. You likely need very specific documentation, and you might need to prove what you’ve paid to the franchisor. You may need business receipts or even records of your employee activities. You don’t know what piece of evidence the case might hang on when it gets to court. That makes it critical that you keep records.
Getting rid of records can even bring accusations of destroying evidence. That can be a crime, so you don’t even want to risk the accusation. It’s much better to just keep everything, even if it might not be favorable to you.
Your case hinges on evidence
When you walk into court, you have to present evidence in a certain way. Each state has a rule book for how evidence comes into court. For business records, there are certain procedures to follow if you want the jury to consider the evidence. There are also rules that govern when you can talk about something that another person says outside of court. For your case to succeed, you have to know all of these rules.
You have strict time limits
When you have a disagreement with your franchising company, pull out your franchise agreement and read it. The company might have inserted strict deadlines for you to file a claim. Even if these deadlines are much shorter than the deadlines that your state law imposes, you usually have to follow them. If you file too late, your claim might be dead in the water before it even starts.
Consider a class action
If you have a dispute with the franchise, there might be a good chance that someone else has the same kind of dispute. You might be wise to combine your lawsuits or even form a class action. That’s what one group of 7-Eleven owners did. The 7-Eleven owners claimed that the company tried to ruin their franchises in order to establish new, higher-paying owners in the same areas. The complaining franchises combined their resources and brought their action together as a group.
The parent company may or may not be liable for the actions of a franchise
The courts don’t agree on when a franchising company faces liability for the actions of a franchise. For example, in Patterson v Domino’s, the court said that the franchise company was not liable for sexual harassment by an employee at a franchise location. The court said that Domino’s didn’t maintain enough day-to-day control over local operation to make the employee an employee of the franchisor.
By contrast, the National Labor Relations Board investigated McDonald’s for unfair labor practices at franchise restaurants. They claim that McDonald’s is a co-employer. This complicates the question of when the franchise bears sole responsibility, when the franchisor shares liability and what level of franchisor control makes the difference when answering this question.
The value of your case
How much your claim is worth in the end depends on a few factors. First, you have to prove that the franchisor is legally responsible. Once you’ve done this, you have to show what your damages are. Most damages relate to lost profits or expenses that you’ve unfairly incurred because of the wrongful actions of the franchisor. If there’s fraud involved, you might have a claim for punitive damages. Again, it’s critical that you have documentation of these expenses.
While franchises are a great way to do business, they can often be the source of conflict and litigation. When you walk into court, you need to know how to present your case. To that end, you need a firm grasp of your case and how you’re going to prove it to the jury. There are a lot of variables that can affect your case. Keep good records so that you can address any scenario as your case moves through the courts.