Watch Out for Rogue Franchisees Post Termination Especially Online
The worst thing that could happen in the franchise relationship is a franchisee which has been terminated for cause taking revenge. You see, if the termination is not done right it can severely hurt the brand name of the franchising company online. It’s even more critical today than it ever has been considering social networks, and the viral nature of negative comments in social media. Franchisors have often been criticized by franchisee attorneys, when settling legal disputes and demanding a “gag order” or legal requirement with penalties that the franchisee never talk about the negotiation or the termination, or any of the details.
Many believe this goes against free speech, however in business law, the parties can agree to anything they wish, and generally it is a stipulation that is put in there by franchisor attorneys to prevent the franchisee from causing financial harm to the brand name post termination. A rogue franchisee which has been in a franchising system for a while knows the ins and outs, and there are many ways that they can go online anonymously, or have a friend post information which will be detracting to the franchisor, perhaps spilling the beans of a failed product launch, or an upcoming change with a franchising company.
Now then, there have been franchisees which have put up websites such as “Such and Such Company Sucks dot com” and in this case the franchisor can have that website turned off because it violates their Federal Trademark and copyright, as it uses their company name in the website domain. Nevertheless, it takes time to get that done, and by then the damage has already hurt the brand name. And even if the franchisor can soothe a rogue franchisee, get the website taken down, the chances of them collecting any damages are slim to none because a former franchisee that’s been terminated, probably doesn’t have any money.
Meanwhile, it isn’t about money, it’s about the strength of the brand, and if the franchisor’s brand name has been reduced to rubble, it will be difficult for them to sell new franchises and it will hurt the existing franchisee’s sales, and that could be trouble. It seems to me that almost every franchisor I’ve ever talked to has had a situation similar to this somewhere along the line and generally it is from a disgruntled or post termination franchisee causing the problem.