International Law

AAFD is Serving the Franchising Industry

Image via Wikipedia

Lance Winslow, writing at Ezine Articles, has an odd view about franchise litigation.

"When a franchisor is sued it hurts the entire franchise system, because any money received from extortion like lawsuits is less money take away from the money that the franchisor needs to support the franchise system."

This is an odd view because under the standard franchise contract any support owed to the franchisee from the franchisor, apart from opening the franchise, is discretionary.

The franchisor generally does not have any legal duty to support a franchisee -one of the oddities of this type of take or leave it contract.

Unlike a securities strike price class action lawsuit in which you could plausibly argue for some cases that the discovery process functions like blackmail and forces defendants to settle, no such class action mechanisms function at the Federal level because the FTC Franchise Rule has not private cause of action.

This is not to say that some class actions are designed largely to transfer monies from the franchisor to a group of franchisees; but, what is wrong with that if the franchisor is adjudged to have broken the contract and is retaining monies that is owed the franchisee?

Doe Lance think that the franchisor should be able to retain this wrongfully held money because it "needs" to support the franchise system?

How very paternalistic of Lance!

Full post as published by Misleading Advertising Law on August 15, 2008 (boomark / email).