What happens when your franchisor sells in alternative sales channels that chip away at a franchisee’s sales? You’re screwed.
A Blockbuster franchisee filed suit in federal court claiming that because Blockbuster now allows customers to buy and rent videos online, the group’s local franchise agreement has been undercut. This was on top of the “no late fee” promo Blockbuster was running. What’s a franchisee to do? Well, there is not much you can do. Most franchisors expressly provide in the Franchise Agreement that they are authorized to sell their products online and in other venues that encroach on your territory.
Another example – The Dippin’ Dots franchisors reserve an exclusive rights to sell their goods online, at special events and venues no matter where a franchisee is located.