Franchising: assessing a franchisor’s disputes

Before joining a franchise network, understanding the franchisor’s disputes can help you assess how it handles commitments and difficulties. A lawsuit alone does not prove that a brand is unreliable; equally, the absence of disclosed lawsuits does not guarantee a trouble-free relationship. What matters is establishing what the disputes concerned, how they ended and, above all, whether any problems keep recurring. Here is how to turn this review into a practical tool for making an informed choice.

1. Understand what information the law requires

In Italy, franchising is governed by Law No. 129 of 6 May 2004. Matters not covered by this specific legislation are subject to the general provisions of the Italian Civil Code.

Article 4 requires the franchisor to provide the prospective franchisee with a complete copy of the agreement and the required attachments at least thirty days before signing. These include a brief description of any court or arbitration proceedings brought against the franchisor and concluded within the past three years, relating to the franchise system in question. Such proceedings may have been brought by franchisees, private third parties or public authorities. Disclosure must comply with personal data protection rules.

This scope matters: the requirement is not for a comprehensive list of every dispute involving the business. A dispute unrelated to the franchise model does not necessarily fall within the required disclosure; nor do ongoing proceedings automatically fall within this particular category.

However, Article 6 also governs loyalty, fair dealing and good faith during pre-contractual negotiations. It requires the franchisor to provide promptly any data and information the prospective franchisee considers necessary or useful, except information that is objectively confidential or whose disclosure would infringe third-party rights. Any refusal to disclose information must be explained. Additional requests should therefore be specific, rather than based on an assumed unlimited right to access every case file.

2. Look at the substance, not just the number of cases

Once you have received the description, prepare a summary for each case. The aim is not to replace your lawyer, but to understand which issues warrant closer examination before you invest.

Record at least the following:

• Subject matter: which obligation or conduct was challenged?
• Timing: when did the events take place, and when did the proceedings conclude?
• The franchisor’s position: what claims were brought against it?
• Outcome: were the claims upheld, dismissed or resolved in another way?
• Remedial action: were procedures or contractual terms changed following the dispute?

A legal claim is an assertion by one party, not an established fact. Equally, a settlement, where disclosed, does not automatically amount to an admission of liability. If the summary uses vague wording such as “the matter has been resolved”, ask what that means in practical terms.

Also consider the size and history of the network: the total number of disputes can be misleading without context. It is more useful to establish whether several complaints concern the same obligation and whether that problem could affect your future outlet.

3. Look for recurring issues and check the answers

The most significant warning sign is not necessarily a single adverse outcome, but repeated similar problems without a credible organisational response. Multiple complaints about the same obligation require a specific explanation, particularly if the current offer retains the terms that gave rise to the conflict.

Send written questions linked to your proposed business. For example: “Did the disputes described concern a procedure that is still in use?” or “What measures have you taken to prevent the problem from recurring?” A useful answer distinguishes between facts, assessments and actions that can be documented.

You can also ask whether there are any ongoing proceedings relevant to your investment decision, explaining why the information matters. If confidentiality concerns are raised, ask whether an anonymised summary could be provided, without insisting on personal data or protected documents.

Then compare the explanations with authorised discussions with franchisees and any publicly available rulings. Reviews, personal accounts and online reports are leads to verify, not the equivalent of court decisions. Nor does a lack of results in public searches prove that no disputes exist: no routine search can uncover every civil or arbitration case.

4. Turn your review into a decision

Take the description you received, the questions you sent and the franchisor’s answers to your lawyer. Ask them to focus particularly on the connection between the problems identified and the obligations you are about to take on.

If a problem has been resolved, look for evidence in the current documentation: an updated procedure, more clearly defined responsibilities or a verifiable contractual commitment. A sales assurance does not provide the same certainty as a written obligation.

Put your decision on hold if significant contradictions, evasive answers or pressure to sign before your questions have been answered remain. There is no need for automatic numerical thresholds: what matters is an assessment proportionate to the actual risk.

In practice: before signing, prepare a one-page summary of relevant disputes, the explanations received and any outstanding questions. Proceed only when you understand what happened and what consequences it could have for your business.