When you are involved in the world of franchise, whether as a franchisee or franchisor, it's important that you are aware of the dangers of "churning."
Churning refers to when a franchise has been sold for the sole purpose of it failing and then reselling it. Money is made not by the product or services offered through the business, but rather, franchisors make money by selling the franchises.
Since franchising can be a very complicated business endeavor, you should contact a business and franchise lawyer who can assist you in the process and help you understand the legal implications involved in franchising.
In cases of churning, a franchisor has no desire to see the business succeed and they fail to live up to the
duties required of a franchisor. Churning can lead to a franchisee suffering great losses and end up with the franchise being forced to close.
If the business is not closed, then it is sold back to the franchisor at a reduced price. The franchisor then sells that same business to another franchisee. Yet again, a franchisor is able to make money.
This poor business practice doesn't harm just the affected franchisees, but can have a negative ripple effect on franchisors who would never engage in such a practice.
If you suspect you are a victim of churning, contact a
New York business lawyer who can help you determine what your rights are and protect the best interests of your business. If you're interested in purchasing a franchise but have concerns about churning, talk to a New York business lawyer who can thoroughly vet the franchisor before you sign on the dotted line.
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