I was looking round the Internet this morning for interesting news from the world of franchising…
And believe me, it’s no easy task to find any real news in the mire of sites pretending that their content is anything other than advertising.
So I found myself on the website of the Boston Herald (www.bostonherald.com) reading about a couple of law suits brought by franchisees in America… which always makes entertaining reading.
The article that caught my eye was headed:
Federal Judge Tosses Suit Against Dunkin’ Donuts
Brilliant and all sorts of mental imagery came to mind… as I’m sure it has to yours.
But the essence of the story was very interesting. A guy had bought four Dunkin’ Donut shops back in 2002 that, apparently, were underperforming. The business didn’t work out and the guy in question decided that Dunkin’ Donuts had deliberately set the operation up to fail.
He was suing for $13 million.
Fortunately, the judge threw out the case, saying the allegations of fraud were a ‘red herring’ and that there was no evidence the franchisor had contributed to his financial losses.
Phew, what a relief!
If you think about it for a second, it’s just not logical for a franchisor, assuming that it has set itself up correctly, would try to make any of its franchisees fail.
How does a franchisor make money? Income from successful franchisees. The more successful a franchisee, the more successful the franchisor – whether income is based on royalty or product sales.
Of course, there may be a time when a franchisor wants to get rid of a franchisee because they aren’t generating enough income – or their performance is deficient in another way, such as being brand damaging. There’s still no need to surreptitiously set up a business to fail if the franchise agreement is drawn up correctly with the right clauses
As long as a franchisor has discharged their duties under the contract and the law, then it’s legitimate for them to get rid of a franchisee who is, effectively, blocking a territory, without the need to break the rules.
If a franchisor does break the rules, say, because they want to get an extra franchisee fee into the bank account, then they deserve to be taken to court.
So, one up for the USA – a sensible and serious judgement in the world’s most litigious society. The public comments on the article also reflect the seriousness of this case and I’ve reproduced a couple of them here:
the worst garbage you can start your day with is a crappy Dunkin Donut. As donuts go they are about the worst…
Their coffee is the best, but I agree, the donuts are really bad
God Bless America!