Minneapolis franchisee lawyer Ron Gardner discusses what a franchisee can do after receiving a default letter.
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Lots of our clients call and say I’ve gotten this notice from my franchisor who says I’m in default and it’s just not true, I didn’t do this. Or I have a personality conflict with my area representative and they came in and did an inspection and they were extra nitpicky and they’re just trying to get me. Most people, their first response to a default letter is that this is not justified and in some cases that’s quite true. But what franchisees have to understand is that if this dispute goes down the road any further than an exchange of letters there’s a third party who’s going to be involved and that’s going to be a judge, a jury or an arbitrator. And so really what they need to find out is what does a third party think about this. And so we try and be very objective at least initially when we review the default notices that our clients get. Well, the franchisor said that you failed your inspection can I see the inspection report? Is this a nit-picky little thing where we can pick up the phone and call the lawyer on the other side and say really, are you going to threaten termination of this guy because he has one piece of chipped tile in his lobby? Is that what this is really about or is there something else going on?
And so that’s the key is to understand what the default is, be objective about it, and think about well, how will somebody else perceive this because in the one case it might be a chipped piece of tile, which I would think my chances of convincing a judge, jury or an arbitrator is not really a material breach and you shouldn’t be terminated for that. On the other hand, if you’re running a food establishment, for instance, and there are rodent droppings in the back room judges, juries, and arbitrators are going to think that’s a big problem. And maybe somebody’s being nit-picky, but you better fix it because I’m going to be not likely to save you if we go that far. We need to figure out a way to solve that problem long before we get to the third party.