Seek Justice With Help From Our Elizabeth Cerebral and Erb's Palsy Attorneys
There is probably no contract between parties that is as disproportionate as a franchise agreement. The franchise agreement will always favor the franchisor, and will include numerous methods by which they can claim unilateral termination, make demands for liquidated damages and attorney's fees, and even demand damages for continued use of the franchisor name. It used to be common that the franchisee took the agreement as it was provided, signed, and then hoped for the best. Times have changed, and it is important to note that the franchisee has gained considerable power in the bargaining process and can now demand changes to the agreement to avoid the costly consequences if the investment does not work out well. Probably the biggest deterrent in franchise and license agreements relates to "liquidated damages".
agrees to pay a fixed sum based on a fixed formula in the event of a court's finding of a breach of the franchise agreement. If the franchisor is successful in a lawsuit against a franchisee, the liquidated damages provision may clear a path for a Court (without any further detailed inquiry) to award substantial monetary damages. Similarly, when dealing with trademark license agreements, licensees may be subject to severe damages based on the liquidated damages clause contained in the license agreement.
Though there may be a breach by the franchisee, the enforcement of liquidated damage clauses is not universal and courts in states such as New York and New Jersey will make an inquiry as to the "reasonableness" of the liquidated damages and the "bargaining power" between the parties at the time of contracting. This is just one of a number of issues that the attorneys at Bailey & Orozco, LLC, can assist you with during the franchise agreement negotiation phase.
What Do Franchisors, Franchisees and Licensees Need to Know?
- Franchisors: Recognize the many issues that you will face if you are providing your idea and business model to 'buyers' looking to capitalize on your idea. Before you allow someone to start using your business name make sure that you have made the proper inquiries about their financial stability, and ensure that you have the necessary provisions in an agreement to prevent the franchisee from potentially harming your business overall. At Bailey & Orozco, LLC Link to Firm Overview, our attorneys are experienced in the area of franchise law and we can assist your business in drafting agreements that protect you.
- Franchisees: Remember that times have changed and you have the ability to negotiate the terms of an agreement. All too often, the agreement provides for large amounts of damages and one-sided provisions that give the franchisor all of the power. Even after paying an application fee, upgrading property and buying equipment and supplies, the franchisee may be subject to additional expenses for upgrades to required software for tracking sales, as well as complicated formulas for the purposes of determining certain recurring fees. It is complicated, but the attorneys at Bailey & Orozco, LLC, have the experience to assist you in understanding the complexities of the agreement, as well as negotiating on your behalf.
If you are a franchisee and are being sued in state or federal court by a franchisor our experienced trial attorneys can mount a defense surrounding the circumstances under which the agreement was made, as well as the reasonableness of the terms. Contact Bailey & Orozco, LLC, today for questions regarding franchise law. 866-919-6193.