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Terminated Franchise & Cost of Disclosure / Court Action

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  • Terminated Franchise & Cost of Disclosure / Court Action

    Hi all, I hope someone can help.

    My partner bought into a franchise which within about 18 moths she chose to terminate. There was simply not enough work coming in and their 'forecasts' were clearly a load of rubbish. Of course, all of this is covered in their T's & C's to allow them to pretty much say they were for illustration purposes only.

    I understand that franchise agreements are massively in favour of the franchisor, and additionally business to business contracts don't have anywhere near as much protection as business to consumer contracts.

    However, I've also read in places that businesses with a small turnover can sometimes be classed as consumers. I'm also interested in any unfair agreement issues that may help a claim against the franchisor.

    I think the agreement said something along the lines of once terminated, we can bring no case against the franchisor (which I believe would be an unfair term) as it would mean they could have massively unfair and possibly even legal contracts in place forcing people to terminate and then have no recourse against the unfair contract.

    Although the franchise territory is not usually exclusive (with this particular franchisor anyway), we did get them to add exclusivity in a signed side letter/agreement. I believe that they breached this exclusivity and would like to know if/how I can go about using the court disclosure procedure to get them to admit this, and ideally agree to refund us the entire franchise cost (and possibly all the monthly management fees etc too).

    We're talking close to £20k down the drain on this franchise, and whilst I don't have much money for a legal case, I am very keen to find the cheapest (free?) way to make them disclose that they have in fact breached the exclusivity and therefore open the route to a full refund.

    I would be extremely grateful if anyone could help with this as we're talking about a life time of savings down the drain to what I can only describe as a churn & burn franchisor taking people's money and leaving them to pretty much fend for themselves until they are forced to close down due to how poor the franchise is.

    Thanks for taking the time to read this and thanks in advance for any advice/assistance you can offer.
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  • #2
    Re: Terminated Franchise & Cost of Disclosure / Court Action

    Side letters can be difficult to enforce, there is a reason why a party does not want their content included in the main body of a contract.

    However, even if you are able to rely on it, personally I doubt whether breach of an exclusivity clause would entitle you to recission of the contract which is effectively what you seek. You MIGHT be able to recover demonstrable loss of profit caused by a competing francise in the exclusive territory but this would, in my view, be very difficult to quantify - which you would need to be able to do if losses were to be recoverable.

    However, the Protocol on Pre-Action Conduct suggests that the other side should provide information on receipt of a letter of claim, have a look here http://www.justice.gov.uk/courts/pro...on_conduct#7.1

    If they won't play ball, you can make an Application for Pre-Action Disclosure, again, have a look at CPR 31.16 http://www.justice.gov.uk/courts/pro...l/rules/part31

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    • #3
      Re: Terminated Franchise & Cost of Disclosure / Court Action

      Thanks for the response and sorry for taking so long to come back. It looks like it's not worth the battle (exactly why they have such complicated agreements to begin with). It's pretty much water tight so that they can essentially con people out of money.

      Comment


      • #4
        Re: Terminated Franchise & Cost of Disclosure / Court Action

        I've been involved in two franchises in the past and the company I recently stopped working with was a franchise whos network got taken over by another courier company who then imposed their rules on everything, inlcuding paying less money.. Unless you're buying into a Mcdonalds or something like that, they just seem to be a system whereby they take money off people and give nothing back in return..

        Learnt my lesson now, will never get involved with another one again..

        Hope you get it sorted out ok..

        Originally posted by inthewind View Post
        Thanks for the response and sorry for taking so long to come back. It looks like it's not worth the battle (exactly why they have such complicated agreements to begin with). It's pretty much water tight so that they can essentially con people out of money.

        Comment

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