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Common Disputes Between Restaurant Franchise Owners and Their Parent Company

When things are running smoothly, overseeing a restaurant franchise can be highly rewarding. Franchises typically require relatively little startup capital. 

This type of structure may also provide business owners with the advantages of a known brand. There is no need for owners to spend countless hours and massive amounts of money advertising or selecting products.

If you are thinking about opening a restaurant franchise, it is vital to contact a knowledgeable corporate attorney. Having a legal professional to represent you can protect your interests in the event of a dispute.

Although franchise ownership may seem like a dream come true, disputes with parent companies can happen. When a business dispute arises, it is advisable to retain an experienced business lawyer

Below, we will discuss a few of the most common disputes between franchise owners and their parent company.

Inadequate Communication

One of the most common problems in any business relationship is a lack of communication. It can be very difficult to establish and maintain adequate communication with the parent company of your franchise.

A breakdown in communication can have significant financial costs for franchise owners. Changes at the corporate level can affect individual franchises. 

If the parent company does not communicate its strategies or intentions, restaurant owners may experience problems. With this in mind, parent companies should always take the concerns and feedback of individual franchise owners into account.

Royalties and Other Costs

Franchise owners benefit from the ability to promote a recognizable brand. This saves massive resources that are necessary to attract customers.

In many cases, the customer base of a franchise is built-in. But in most cases, franchisees pay a price for this professional benefit. 

Franchisees usually are obligated to pay an initial licensing fee to use the intellectual property of the parent company. Additionally, individual restaurant owners are often required to pay regular royalty fees.

These fees may be based on percentages or a fixed amount. Fees are typically used for marketing and operations. 

The need to regularly pay to maintain your business can result in tension between franchisees and their parent company.

Technological Problems

It is vital to choose the right technological systems to run a successful restaurant. Typically, it is best to rely upon the same systems that the parent company uses.

This can help to smoothly integrate information sharing and communication. But some restaurant owners are not very receptive to this approach.

Using different systems at the corporate and franchise level can make accounting difficult. It can also cause problems for reporting on the state of the business.

Technological issues may create problems in the relationship. In some cases, a corporate entity might rely on older or less effective technology. If the parent company is unwilling to change and adapt, it can result in a dispute between the two parties.

Franchises and Corporate Standards

It is important for parent companies to recognize and respond to the needs of their individual franchises. However, franchise owners should also strive to cultivate the most productive professional relationships possible.

Part of the success of the franchise model is the appeal of consistency. Customers can count on the following elements of a franchised restaurant to be consistent:

  • Menu
  • Brand
  • Aesthetic
  • Design
  • Service
  • And other Intangibles

Varying these factors significantly from store to store could cause a drop in customer satisfaction. When these things are not consistent, the reliability of the brand may be called into question. 

Therefore, it is crucial for franchise owners to recognize the strengths of the franchise model. Franchisees should hold themselves and their employees accountable. They should strive to maintain the standards of the parent company.

Speak with a Business Attorney in New York

If you have questions about dispute resolution in a professional context, reach out to an accomplished corporate attorney. The skilled legal team at Woods Lonergan can review the facts of your case and help you determine the best path forward. 

For an initial no-cost legal evaluation, reach out to Woods Lonergan in New York today. We will work tirelessly to protect your professional interests.