Common Franchise Conflicts And Legal Strategies For Resolution

Posted July 30, 2025 in Uncategorized

The relationship between franchisor and franchisee can be immensely profitable for both, but common (avoidable!) disputes can quickly turn a thriving business into a chaotic tangle of litigation. Our Colorado commercial litigation lawyer can attest that strong, detailed contracts and clear expectations prevent a lot of conflict; understanding common reasons franchise disputes occur can help you take proactive steps to prevent them from cropping up in your enterprise.

Common Causes of Franchise Disputes

Franchise conflicts are usually the result of a breakdown in the relationship and communication between the franchise owner and the franchisor.

Breach of contract is a frequent source of conflict between the two parties. Failure to adhere to the terms of the contract can often be worked out between the two parties, especially if the contract is vague and its terms simply need to be clarified. Violation of operational standards is one of the most common types of contract violations, but fortunately, it can often be resolved by the franchisor setting more detailed standards and giving more guidance for the franchisee.

Other breaches of contract are more serious and could lead to financial, legal, or tax trouble for both the franchisee and the franchisor. Failure to adhere to proper reporting standards could cause trouble with the Colorado Department of Revenue or the IRS. Violating a territory exclusivity clause may lead to litigation, as resolving the matter isn’t quick and easy.

Non-payment of franchise fees, royalties, or advertising fees can also lead to litigation. The franchisor may not be able to recover what they’re owed without initiating a lawsuit. The franchisor may be forced to terminate the franchise agreement, which not only results in loss of revenue from the franchise site, but can also diminish their brand. If franchises are consistently closing in a specific territory, customers may easily lose confidence in the brand.

Quality control issues can cost both franchisor and franchisee money. Customers expect a certain standard from the brand; failure to deliver means lost revenue for the store and often loss of customer loyalty.

Legal Strategies For Resolving Franchise Disputes

Some franchise disputes can be resolved through a simple conversation between the franchisor and franchisee. Use your franchise agreement as a guide, and note instances where the other party’s actions (or inaction, such as failure to pay franchise fees) deviated from the signed contract. Ideally, approaching the dispute from this practical standpoint can efficiently and effectively resolve the dispute.

If a one-on-one conversation doesn’t resolve the matter, you could take the concern to mediation; sometimes the guidance of a neutral third party can help you resolve the matter without going to court. Mediation is private and less adversarial, and can preserve your business relationship. You have the right to be represented by your Colorado commercial litigation lawyer in the process.

Your franchise contract may include an arbitration clause requiring both parties to resolve the matter through binding arbitration. Arbitration is usually faster and less expensive than a civil suit, and the rules of evidence are looser. However, if your arbitration is binding, there’s no avenue to appeal the arbitrator’s decision if it doesn’t go in your favor.

Once your franchise dispute moves to litigation, it’s harder to preserve any business relationship, and at this point, you may not want to. If you’re owed damages, then litigation may be the only avenue available to recoup your losses.

Do you have a franchise dispute you cannot resolve on your own? Volpe Law, LLC can help. Contact our firm today to speak with our Colorado commercial litigation lawyer.