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One of the most important features of franchising is uniformity. By using unauthorized products and/or suppliers, franchisees will start to break away from the uniform system standards set by the franchisor. This will then lead to consumer dissatisfaction and will eventually tarnish the brand image.
To protect the integrity of the system and the brand, franchisors must take affirmative steps to stop the use or sale of unauthorized products and supplies. Here are following steps how franchisors can prevent the use of unauthorized goods before problems arise.
Franchise agreement
It all starts with the Franchise Agreement. The starting point for any system standard is the franchise agreement. If the franchisor has not adequately reserved its right to control the products and supplies sold or utilized by its franchisees, its ability to keep unauthorized items out of the system will be severely limited.
Indeed, where the use of unauthorized products and supplies has been litigated, courts routinely begin their analysis with a careful review of the franchise agreement.
Termination
A licensor has a right to terminate a license to use its trademarks when the licensee fails to meet the standards established by the licensor for products marketed under its trademark. Termination may be an option where a franchisee sells unauthorized products or uses unauthorized supplies.
Unauthorized products and supplies are often implicated in conjunction with other terminable offences by franchisees. The legal basis for termination is a breach of contract—constrained by any applicable state franchise relationship laws. A breach occurs whenever a franchisee fails to abide by contractual terms limiting use or sale of products and supplies to those authorized by the franchisor.
Proactive Approaches
Of course, the most effective way to resolve a problem is to prevent it from occurring in the first place. While litigation can effectively end use or sale of unauthorized products and supplies, pragmatic and proactive steps may forestall such noncompliance before it ever begins. Other less significant steps can be taken to maintain compliance with product and supply standards.
Get the Evidence
Whatever a franchisor does to ensure compliance with product and supply standards, the importance of gathering documentation and evidence depicting the non-compliance cannot be overstated. Photographic, documentary, testimonial, and other evidence of noncompliance serves as the factual basis for any relief sought from unauthorized products or supplies. The more evidence collected, the better the case comes for effective enforcement.
