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Asked over 1 year ago - Chicago, IL
FlagThe company is in home tutoring. The model is that we go to meet the client and then interview tutors and make a match. In interviewing tutors, I found that the parent co had hired tutors over the phone and sent them out to clients they never met because the franchisor is in another state. The co is supposed to send leads to the franchisees that are near those potential clients. Instead, the franchisor is now operating in our backyard with a cheaper business model (unbeknowst to us) and using our royalties and ad dollars to fund a company that is now operating in direct competition to us. I have spent hours and thousands of dollars building up a market and brand name in a city where I don't own the whole territory but it was hard to segment the population. Do I have a cause of action
This sounds like you have a non-exclusive franchise rather than an exclusive one. You need to see a contract attorney or franchise expert to review the franchise agreement for exclusivity.
Do not spend thousands of dollars buying a franchise without expert legal guidance. Franchisors may or may not have anything in mind except getting your franchise fee. Some support their franchisees very well. Others get the fee and run. Still others get the money and run to set up their own shop in competition with yours. If you had an exclusive agreement, this company is likely in breach, otherwise not. Your attorney should know for sure.
Lesson to be Learned: Have an attorney review a franchise agreement before signing.
Your rights under this scenario are almost entirely dependent on the terms of your franchise agreement and in particular on the precise language of the lead referral provision and on the extent to which the franchisor reserved rights for itself under the territory provision of your agreement. You should have the agreement reviewed by knowledgeable counsel.
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