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Contract Litigation
In today's world, where it's more competitive than ever to be a franchisor or franchisee, there is now one more thing to worry about: contract litigation. It is more prevalent, complicated, and prohibitive ' and worse yet, according to the Bureau of Justice Statistics of the U.S. Department of Justice, one-in-three plaintiffs (33%) lose their contract disputes at trial. From construction contracts, to supply contracts, to equipment leases, franchisors and franchisees might face the problem of litigating numerous legal disputes simultaneously. This, of course, can be devastating for a business, whether big or small. So what can you do to avoid these pitfalls?
First, know your risks. Too often, both franchisors and franchisees assume they are exempt from certain liabilities. Take the recent decision in Massachusetts against the franchisor Coverall North America, Inc., a national commercial cleaning service. It chose to pursue a business model that treated its franchisees as independent contractors, reducing its costs and increasing flexibility, but a U.S. district court judge disagreed. Of course, many have argued that the judge's ruling was overreaching; nevertheless, Coverall was exposed to significant risk.
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