Many of you franchisees ask us if franchisors can treat franchisees differently. The question comes in various forms:
- My franchisor isn’t collecting royalties from some other franchisees. So why do I have to pay?
- A number of franchisees in our system left and are operating as independents, even though there is a non-compete in our agreement. Can I do the same?
- The franchisor is introducing new programs/menu items/offerings across the system. Do I have to take them? Or …Can I refuse them?
These are, in fact, very distinct and different questions.
As a general rule, your franchisor can’t discriminate – it cannot treat you differently from “similarly situated” franchisees. But that’s the hitch: what’s “similarly situated?” If, for example, another franchisee had a franchise agreement that said the franchisee didn’t have to pay royalties if it was not profitable, but yours did not, then you would not be “similarly situated.” But if you had the same agreement, the franchisor would likely be discriminating and you might be able to sue for damages.
With non-competes, a lot depends on where you are. If the franchisor has let franchisees in California off the hook of the non-compete, it’s because they cannot be enforced in California. If you’re in Minnesota, then, you may be out of luck because you’re not “similarly situated.”
Give us a call or shoot us an email if you feel you’ve not been treated like other franchisees. We’ll be happy to take a look at your issues without obligation.