The Franchise King® | Learn How To Become A Franchisee

Franchise Advice: Count The Number of Lawsuits Against The Franchisor

franchisor lawsuits

You’ve whittled your franchise search down to two concepts.

(This post may contain affiliate links. Please read my disclosure policy).

They’re both terrific franchise opportunities.

They both cost about the same to buy.

The franchise sales reps are both nice. They’re both professional, too.

You took my advice and are involving your family members early in the process-and they’re good with your franchise choices.

You’re almost done with your research. You just have to go over the Franchise Disclosure Document. (FDD)



Get Your Free Franchise Buying Checklist!
Get Your Free Franchise Buying Checklist!
Invalid email address
You'll also receive my useful (and free) VIP Franchise Newsletter!



You have it your hot little hands, right? And, you know about the earnings claims that may be contained in it, correct?

Fantastic.
 

Franchise Advice: Count The Number of Lawsuits Against The Franchisor

The FDD has a specific section on litigation…on franchise lawsuits. You knew that, right?

From Josh Brown and Stephanie Maris:

“When reviewing the FDD, if there are any lawsuits listed in Item 3, it is important to look into the suits to determine the circumstances and the ‘who, what, when, where, and why’ of the case, so to speak. You should be cautious of any litigation involving the franchisor as a defendant because it could be a signal of larger issues with the franchisor’s system or operations.”

The team at Indy Franchise Law continues…

The franchisor only has to disclose its involvement in certain types of legal actions within the last ten years from the issuance date of the FDD. Also, the franchisor only has to disclose material franchisor-initiated lawsuits against franchisees that have been filed over the course of the last fiscal year. Therefore, even if there are no suits listed in Item 3, you should ask the franchisor whether it has been involved in any litigation over the course of the franchise and whether the franchisor has ever initiated a lawsuit against any of its franchisees and the reasons why.”

That information is pretty important to know about. If you’re deciding between a couple of different franchise opportunities, lawsuits-or the absence of them, may be a deciding factor in which opportunity you go for.

Remember, even if no lawsuits are disclosed in the FDD, you still need to ask the franchise sales rep or the CEO if there is any pending litigation that’s not listed in the FDD.



Buying A Franchise?
You're Going To Need This!
franchising guide


Franchise lawsuits happen for a variety of reasons. Don’t get yourself into a tizzy just because I brought this topic up as one (an important one) to investigate as part of your franchise research. Just know that franchisors occasionally get sued by franchisees, vendors, suppliers…and franchisees occasionally get sued by vendors and by franchisors. Lawsuits are part of any type of business. As a matter of fact, lots of independent businesses are involved in litigation, too.

 

It’s All In There

Almost everything you need to know about the franchisor you’re thinking of partnering with will be contained in the FDD. A drab, boring, and extremely long, wordy legal document.

I’m kidding. The FDD truly is an exciting 350-page document to read through.

Look!

 

Please Share This Article!
664Shares
Note: When you buy through links on our site, we may earn an affiliate commission. In addition, I've started to use AI to help me craft better article titles and headings.
joel libava

I'm The Franchise King®, Joel Libava. I help prospective franchise owners avoid bank account emptying mistakes. For over 20 years, I’ve been helping people make smart, informed decisions on franchises to buy, and I can help you, too! #thefranchiseking
“The fantastic thing about Joel is his neutrality. Because he is not getting an incentive fee, he will always give you the advice that you need (even if not what you necessarily want) and that's pretty unique these days. Thank you Joel!"
- Nic Church, France
Free Franchise Buying Tools Franchise Compatibility Quiz Net Worth Calculator
Recommended Reading
How Franchises Work
Pros And Cons Of A Franchise What Is The Franchise Fee? How To Buy A Franchise
Top 21 Franchise Opportunities
Starbucks Franchise Facts
Featured Franchises!
10 Best Franchise Websites
About Franchise Consultants
How To Read A FDD
Questions To Ask Franchisees Franchise Discovery Day Franchise Reviews
Your Franchise Business Plan

A 401(k) For A Franchise?

Top 10 Franchise Buying Tips
Unlock Franchise Buying Secrets!

Sign up for our free VIP Franchise Newsletter for access to new articles and expert franchise buying advice

Invalid email address
Start a Business with CorpNet