How to avoid costly franchise disputes – key steps every franchisor should take

September 29, 2025

How to avoid costly franchise disputes – key steps every franchisor should take

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By Lloyd Pike

Read time: 4 minutes

Franchising is a proven business model for growing your business, allowing for faster growth with reduced capital investment – but what happens when it goes wrong, and how can you minimise the risk of potential disputes?

Our commercial disputes expert, Lloyd, has laid out the essential dos and don’ts to allow franchisors to be better equipped to both reduce and manage potential disputes.

Do

1. Carefully consider the structure of your franchise arrangement from the outset

Before launching or expanding a franchise, ensure you have the proper management structure in place. It is essential to consider:

• Which entity should act as the franchisor.
• Whether a specific group structure is needed for oversight and liability management.
• How responsibilities will be divided to maintain consistent standards across the network.

A clear structure helps prevent confusion and conflict later.

2. Have a robust franchise agreement in place

A well drafted franchise agreement is essential for a strong franchisor-franchisee relationship. It should clearly set out:

• Roles and responsibilities of all parties.
• How disputes are to be handled.
• The termination clause so that both parties understand when and how the agreement may be ended.
• Flexibility considerations to adapt to changes in technological requirements, industry practice and unforeseen circumstances.

Even though negotiation of franchise agreements can be less contentious than other commercial contracts, clarity and foresight are essential to prevent misunderstandings.

3. Implement proper training and support

Providing appropriate guidance and training will minimise the risk of disputes arising.

All franchisees should be properly trained and equipped to run their franchise efficiently.

Franchisees should also be aware of the procedures they will be expected to follow and how to handle commonly encountered issues consistently and effectively.

Initial and continuing training is also a requirement of the Code of Ethics for Franchising.

Don’t

1. Ignore Alternative Dispute Resolution

It is possible that disputes will not need to become legal proceedings and instead can be dealt with without court input or escalation.

It is important to help parties signpost disputes early, consider mediation and other ADR routes as these may better support a continuing positive working relationship. These alternative routes can save time and costs, preserve relationships and provide more flexible, mutually agreeable solutions.

2. Fail to communicate key decisions which may impact the franchisees
   

Whilst franchise agreements typically give the franchisor a large degree of discretion to take decisions which may materially impact on the franchisee, it is often important franchisees are consulted to ensure the continuation of good faith within the relationship and the wider network.

3. Disregard Franchisee issues

Ignoring an issue will not make it go away so it is important that there is a clear route for franchisees to express any issues or grievances as early as possible. Instead:

• Provide a clear and accessible process for franchisees to raise issues.
• Address problems as soon as they arise to keep relationships positive and avoid costly legal battles.

Typically, the earlier a potential dispute can be dealt with, the better.

How can we help?

If internal options to manage a dispute with a franchisee have been exhausted, it is always recommended to take legal advice before any legal proceedings are considered, as this can help avoid escalation.

Our specialist dispute team at Darwin Gray has years of experience in navigating disputes with franchisors and franchisees, and our experts will be able to guide you through the options and provide you with the clear advice you need to tackle the issues head on.

If your franchise business is facing a dispute, please get in touch with Darwin Gray today, using the contact form, or via 02920 829 100 to see how we can support you and your business.