What Can I Do If My New York Franchisor is Franchise Churning?

churning new york

Few topics provoke greater controversy in the franchise sector than the issue of churning. This much-debated matter has the capacity to draw sharp responses from both franchisors and franchisees alike. These divergent perspectives range from denial to claims that it is endemic in the franchise sector. But what exactly is franchise churning? For more information on what you can do if you suspect your New York franchisor of franchise churning, please read on, then contact one of our experienced franchisee litigation attorneys today.

What constitutes franchise churning in New York?

A wide range of actions may constitute churning. At its worst, churning is deliberately setting up a franchisee to fail so that the franchisor can resume and resell the business. The more time the business sells, the greater the franchisor’s profits. At the other end of the spectrum, some unscrupulous franchisors practice churning by buying back profitable franchise operations at lower-than-market values to increase their portfolio of company-owned outlets. Again, the intent is to increase the franchisor’s own ongoing profits, regardless of their deleterious impact on the franchisee’s finances and other concerns.

Can I sue my franchisor for franchise churning?

Technically, you can sue anyone for any reason at any time. However, that does not mean you will receive a favorable outcome or that your case will even progress beyond the preliminary stages. When considering filing a lawsuit against your franchisor for franchise churning, you should consider the following:

  • Limitation periods: New York franchisees have three years, from the date they signed the franchise agreement, to bring forward a lawsuit against their franchisor. If they wait longer than that, they will lose the right to do so.
  • Mandatory arbitration provisions: The majority of franchise agreements contain mandatory arbitration provisions, which require a neutral third party to act as judge and jury. This may reach a resolution quicker and for less expense, but you may have to compromise.
  • Possible counterclaims: The franchisor may assert counterclaims against the franchisee, such as:
    • Lack of funds
    • Poor people skills
    • Reluctance to follow the formula
    • A mismatch between the franchisee and the business
    • An inept franchisee
  • The time and money spent on arbitration/litigation: Unscrupulous franchisors benefit from prolonging the process and costing you irretrievable time and money. Arbitration can take up to a year or more to complete, and litigation can take even longer, especially if the court is particularly backed up.

At first glance, these considerations may seem intimidating. That is why it is absolutely crucial you reach out to one of our skilled franchise law attorneys to discuss the particulars of your case and weigh the advisability of your options.

Contact Our Experienced Franchise Lawyer Today

If you have any franchising issues, contact Fortman Spann, LLC online today to schedule your initial consultation.

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