This article details the legal disputes and subsequent law suit between franchisor Quaker Steak & Lube and a franchisee in Pennsylvania. The franchisee claimed:
- [franchisor] lied to him about the restaurant’s prospects for profitability;
- approved too large a restaurant for the State College market;
- forced him to use a select list of food vendors and menu choices that hurt his chances for profitability; and
- did not provide adequate training, startup marketing or operational support.
The franchisee claims a projected $100,000 weekly gross sales ($5.2 million annually) was given to him by the franchisor, when actual revenues were $80,000 a week in 2006, $61,000 a week in 2007 and $45,000 a week in 2008. The judge agreed with the franchisor that the projections were simply that – projections and not historical fact or earnings claims.All other claims were also denied by the judge. That’s how these law suits usually end unless there is real “smoking gun” evidence of a breach of the franchise agreement or fraud.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
Whew – I am glad to see common sense finally prevailed. Over the past two years a disturbing inkling started to occur in some jurisdictions in regard to franchising where it seemed judgments were starting to be rendered less on a legal basis then trying to protect idiots from their own poor judgment.
Based on the article, it seems this was spot on.
It does seem and is becoming fact, that all monies in franchising flows to the center – All aiding the franchisor. To make a franchise successful the franchisor must let the franchisee at least make a living and aid him in his endeavors!! The proceeds must be shared. It is not for the benifit of only the franchisor, yet is self evident that that seems to be the theme.
There has been a price war, the $1.00 menu !! To increase the brands share of the market.
Well it became a big give-away at the expense of the store owner. He still pays the same price for the product and has to give it away —
Promotions, coupons, and advertising of the $1.00 menu take the profit right out of that product and who suffers this loss – the store owners. Always with the theme of increasing foot traffic. The majority of the franchise owners suffer great losses due to this, as customers have become wise to the $1.00 giveaway and such and they shop the bargains. Again, all to the loss of profit for the stores.
What a sad state franchising is in. The franchsor dictates, what to sell and how much and leaves the tiny crumbs for the store owners. We will, in the short future, see many store owners fail !!
I can’t disagree with what you said. But if you want to be the boss, or own your own business don’t become a franchisee in a master-slave system.
This is the reason why it is important to evaluate the franchise and the franchisor first before making a final decision as to what particular franchise opportunity to choose. The possibility of disputes can be minimized if not totally avoided by giving yourself enough time to gather relevant data about the franchise and the franchisor. Save yourself and your investment from trouble by conducting your due diligence and referring to the best franchise guide prior to making your decision.