Franchise salespeople have to be extra careful when selling franchises. A franchise sale gone bad can lead to litigation or arbitration. Even in those cases where the franchise agreement calls for arbitration a fraudulent misrepresentation by a franchise sales person can break the franchise agreement and the arbitration clause. Arbitration in franchising actually works good for both parties and saves money in the litigation costs. If there is a dispute between the franchisee and the franchisor then it makes sense that any money changing hands goes to the party damaged and not the lawyers. But arbitration is never perfect and sometimes the arbitrators are connected professionally to the franchise or in some way. Recently I discussed this issue with a franchisee who found out the arbitrator who heard their case actually had business dealings prior with the franchisor in question. Well that is unfortunate they should have excused themselves, I would have. But also realize that many franchise ores are well connected to the franchise community and the IFA, well really everyone knows everyone else, it is a really tight community. I have personally met some 150 franchisor founders due to my work in such associations and meetings. All the Franchise Consultants, vendors, lawyers all meet in seminars all the time. This causes an issue for franchise arbitrated disputes. But if you consider that these problems can be avoided if the salespeople in the original sale follow the rules, then perhaps it is not so bad. If you are a franchise sales person please follow the rules, because down the road it can be hell for both parties. Please consider this a 2006. |
