What Can I Do With A ‘Bad’ Franchisee? (2025 Updated)

Contents

Franchisor-franchisee relationships remain a cornerstone of modern business in 2025, built on mutual dependence and reliance. When nurtured effectively, a strong relationship can generate significant benefits for both parties, underpinning a successful and resilient network. However, as with any business relationship, occasional bumps in the road can occur.

It is sometimes easy to demonise or classify franchisees as ‘bad’ or ‘difficult’ due to underperformance or challenging attitudes, but such thinking is reductive and can be unfair. Most franchisees are not inherently problematic; indeed, many issues stem from controllable factors on the franchisor’s side. For further insight into resolving these tensions, check out our specialist franchising lawyer resources.

There is also a shared fear of failure among both franchisors and franchisees in 2025, which can contribute to an emotionally charged and stressful atmosphere. Under such conditions, blaming the other party may seem like the easiest option. A more productive solution is to engage a specialist franchise lawyer to examine the root causes behind why a franchisee might develop a challenging attitude, ensuring you address the underlying issues effectively.

Why Do Problems Arise?

Many issues between franchisors and franchisees result from differences in expectations, which are ideally set out during the initial negotiations and finalised in a franchise agreement that legally clarifies these obligations. Clear, unambiguous expectations help to minimise misunderstandings and conflict.

If both parties share a clear understanding of their roles and responsibilities, many common issues are avoided. This is why having a lawyer review your franchise agreement before it is finalised is essential, ensuring that updated contractual clauses reflect today’s legal standards and market conditions.

Communication

Effective communication remains a crucial aspect of any franchise relationship. Breakdowns in communication can erode trust and lead to further problems, particularly where a franchisor manages a large network of franchisees. In 2025, many franchisors are utilising dedicated digital platforms and regular virtual meetings to ensure clear and ongoing dialogue.

When significant strategic or financial changes occur, it is vital to communicate these changes clearly and proactively with each franchisee. For example, establishing direct contact via a dedicated phone number or email address can help dispel rumours and allow immediate clarification. Our digital marketing services can also provide guidance on effective communication strategies in today’s online environment.

Before announcing any major changes, it’s advisable to seek franchisee input to mitigate communication gaps. If you are unsure of the impact of a particular decision, one of our specialist lawyers can offer advice tailored to your circumstances.

Franchisee Exposure

Depending on your organisational structure, franchisees often bear a higher level of exposure compared to the franchisor. Poor decision-making or ill-advised changes tend to affect franchisees most significantly. In 2025, many franchisors are adopting risk-sharing mechanisms and comprehensive support packages to reduce this exposure. For instance, reviewing your franchise agreement periodically can ensure responsibilities and risk factors are balanced.

Costs And Royalties

Franchise royalties are essentially the fees that franchisees pay for the right to operate under your brand. To prevent disputes, the royalty structure should be carefully aligned with the support and services that you provide. If royalties are set too high, they can induce considerable financial stress, which may lead to underperformance. Conversely, if you are committed to providing ongoing training and marketing support, a higher fee may be justified.

We’ve discussed franchise costs and royalties further in this article. Additionally, for guidance on fair fee structures, explore our resources on Selling A Franchise which includes updated best practices for 2025.

Issues With Technology

Technology is a key driver of business success today, and its implementation must be handled with care. Franchisees may become accustomed to a specific set of technological tools, and a sudden change mandated by the franchisor can be both confusing and stressful. In 2025, many franchisors use cloud-based systems and mobile apps to streamline operations, but any transition to a new platform should be accompanied by clear explanations and robust training programmes.

Ensuring that the rationale behind technological changes is well communicated and supported by hands-on training helps achieve smooth implementation, ultimately leading to enhanced franchisee satisfaction and better overall performance.

Corporate Standards

While many issues originate with the franchisor’s control of the brand, franchisees also carry responsibility. Consistent adherence to corporate standards is essential. If a franchisee consistently fails to meet these standards—whether intentionally or accidentally—it poses a risk to the brand. Updated monitoring systems, which are common in 2025, help ensure compliance, and any deviations should be promptly addressed.

Your franchise agreement should include clear provisions that outline corrective measures, such as financial penalties or termination options, in the event of repeated non-compliance. This ensures that both parties understand their obligations from the outset.

Disagreement Over Strategy

It is not uncommon for a franchisee to invest in a franchise only to encounter significant strategic shifts from the franchisor post-purchase. Such changes can be unsettling if not managed properly. The key to success lies in clear communication about the long-term vision and strategy behind any proposed changes. In 2025, it is beneficial to support these transitions with evidence-based plans and, if necessary, temporary adjustments such as reduced royalties to ease the impact.

While the ultimate decision rests with the franchisor, involving franchisees in the conversation can help build consensus and alleviate potential tensions.

Additionally, aligning your strategy with current market trends—such as adapting to digital transformation and evolving consumer behaviour—can further smooth the transition process. Learn more about managing these changes in our Franchise Agreements guide.

How Can I Resolve These Issues?

Problems are not set in stone – they can be resolved through proactive measures and regular reviews of your franchise arrangements. There are multiple strategies you can implement to ease tensions and restore a positive relationship. For personalised advice, contact one of our lawyers for quick and easy assistance.

It is important to strike a balance between judicious oversight and respecting the autonomy of your franchisees. Overbearing management can lead to feelings of micromanagement, thereby exacerbating conflict. Clearly defining your role in the initial agreement and periodically reviewing it—with our business set-up experts—is essential to maintaining a harmonious relationship.

Ensure that your franchisees feel equally supported and involved. Should problems persist despite your best efforts, exploring formal resolution methods such as mediation or, as a last resort, legal action may be necessary. Our comprehensive suite of services, including legal tips and advice on dispute resolution, is designed to help you navigate these challenging situations.

Contract Termination

Terminating a franchise agreement should always be considered a last resort. In 2025, the process of terminating your franchise agreement remains a significant step due to the potential financial costs and lasting impact on your brand’s reputation. It is essential to exhaust all other resolution options before proceeding down this path.

This article explains the various ways in which you can validly terminate a franchise agreement. However, as emphasised, this option is only viable after all attempts to repair the relationship have failed. Should termination become unavoidable, our lawyers at Sprintlaw can offer clear guidance on navigating the process.

Key Takeaways

The franchisor-franchisee relationship in 2025 is built on mutual dependence where communication, clarity and fair expectations are critical. It is rarely beneficial to brand a party as ‘bad’ without first understanding the broader context and challenges encountered.

Reviewing your franchise agreement and ensuring that it reflects current market conditions and legal standards is a smart first step if you encounter difficulties. For those cases where remedying the situation isn’t possible, the termination of your franchise agreement should only be considered as a last resort.

Regular assessments of communication channels, cost structures, and corporate standards will help maintain a healthy relationship and reduce the potential for conflict. For further insights into modern franchise management, visit our Franchise Agreements hub.

In addition, staying informed through our latest articles such as How to Change Your Business Structure and Starting a Delivery Company can offer broader insights into managing evolving business relationships effectively.

Franchising Resources

Franchising law is complex and continually evolving. We offer numerous resources to guide you at every stage of the franchising process, including:

Need Help?

In any case, engaging a specialist franchising lawyer is always a wise step before initiating any legal action or making significant changes to your franchise framework. Given the critical nature of the franchisor-franchisee relationship, every step should be closely reviewed.

If you need assistance or further advice regarding your franchise system, you can reach out to us at [email protected] or call us on 0800 002 184 for a no-obligation chat.

Will Tinney

Will is currently completing his Juris Doctor at the University of Melbourne and is interested in helping to provide equitable and efficient access to legal resources.

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