Tennessee company files business lawsuit against franchisee

Franchising a business can be a great way to appease one's entrepreneurial spirit while minimizing the risk. This is because the parent company provides its name, goodwill, goods, equipment and business practices in exchange for a licensing fee and a portion of revenues generated. With careful and thorough planning, those who pursue a franchise opportunity in the right place and at the right time can see tremendous success. However, there are risks associated with these business arrangements, and when disputes arise between a franchisee and franchisor, litigation can ensue.

Just take a look at a lawsuit that was recently filed by Perkins & Marie Callendar's. It claims that one of their franchisees, which owns 26 Perkins locations in multiple states and has failed to pay more than $2 million in royalties and other fees, including those tied to marketing. As a result, Perkins & Marie Callendar's is looking to shut those locations down, which accounts for 7 percent of the company's locations. It has revoked its license and obtained a temporary restraining order.

The franchisee posed a number of problems for Perkins & Marie Callender's. In addition to not paying agreed upon fees, the franchisee is accused of failing to maintain quality controls and serving unapproved food items and presenting unapproved specials. It is also alleged that the franchisee failed to address consumer complaints. The company will no doubt try to recoup its monetary losses while seeking to distance itself from the franchisee so that it can protect its brand name and image.

Franchise agreements, when properly negotiated and adhered to, can serve as a wonderful foundation upon which to build a strong business in the local community. But, when tensions rise and disagreements boil over, litigation can result and threaten the franchise's viability. This is why those who find themselves facing business disputes, like these need to consider working closely with a legal professional who is experienced in this area of the law.

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