Franchise Disputes: Do a Deal, Don't Send a Message

A conversation with John Pratt, founder of Hamilton Pratt. Interview by Tony Johnston, FranchiseAir.

John Pratt got into franchising by drafting a franchise agreement for the first chairman of the British Franchise Association, and went on to be the BFA’s legal adviser for six years. He founded Hamilton Pratt, a law firm that acts only for people involved in franchising — mostly franchisors, to a lesser extent franchisees and franchise consultants — and today the largest specialist franchise law firm in Europe. He wrote the standard textbook Franchising: Law & Practice, and has chaired the International Bar Association’s international franchise committee.

We asked him about disputes: where they start, which clauses end up in front of him, what happens when a franchisor terminates a franchisee, and when to stop fighting. His answers keep returning to two points. Franchisees who make money don’t sue. And the only people who win in litigation are franchise lawyers.

Only franchising

Tony: My name is Tony Johnston and I work for franchise360.co.uk. We do franchise software, and have been doing for a little while. I have the pleasure of sitting with John Pratt today. John is going to talk a little bit about legal things — but firstly, John, hello.

John: Hello, Tony. Shall I introduce myself?

Tony: Yes, please — I was going to ask you to.

John: Well, look, I’m John Pratt and I’m the founder of Hamilton Pratt. We’re a bit unusual because we only act for people involved in franchising: franchisors, to a lesser extent franchisees, franchise consultants and so on. There are one or two exceptions, but only one or two. So all we do is franchise-related work.

Tony: And I know you’re involved with the BFA. Do you want to tell us a little bit about that?

John: Well, the reason I got into franchising is I did a franchise agreement for the first chairman of the BFA. And then I became the BFA’s legal adviser, and I did that for six years — which I made clear right from the beginning was all I wanted to do. And then the BFA decided that they didn’t need a legal adviser, so I must have been so bad that they came to that conclusion.

Where disputes start

Tony: I’m sure that’s not true. So, today we are going to talk about disputes, which I think is an interesting topic. It doesn’t cover everything legal to do with franchising, but we’re going to focus on disputes. So my first question, John, is: where do disputes generally start? Where are the flashpoints?

John: Well, I’m going to answer a different question — although it’s a connected question. If you’ve got franchisees who are making money, generally you don’t get disputes. There are exceptions to that. Where they arise, assuming that franchisees are unhappy for whatever reason, is essentially misrepresentation claims — which are basically where a franchisor says “you can make a million pounds a year taking our franchise”, and franchisees can’t, nobody does, and that’s an obvious misrepresentation claim.

Other issues relate to franchisors exercising their obligations in a heavy-handed, insensitive way, and essentially franchisees get fed up with it. But bear in mind that franchising is really heavy in disputes, because you’ve got a five- or ten- or even longer-term franchise agreement, a really complicated agreement — 50, 60-page agreements. At the beginning franchisees love franchisors; they think they’re fantastic, they’re learning. And then, inevitably, they say: what are we paying the franchisor for? We’ve got our clients, we’ve got the brand, we’ve established a business — we don’t need the franchisor any more.

Tony: And do you see those disputes — in a way, are they born on day one? In other words, that over-promising you talked about, or clauses that are perhaps badly written — is it that sort of thing? Or do they tend to really not be spotted until much later on?

John: Well, it’s both. Basically: don’t misrepresent, and have a sensible franchise agreement. I see way too many franchise agreements where the lawyer who’s prepared them goes into great detail about stuff that really shouldn’t be there, and that causes friction. So it’s a combination of: don’t tell porky pies when encouraging franchisees to join your network, and have a sensible franchise agreement that you can defend — because judges really hate overtly one-sided franchise agreements, especially if they’re 120 pages long.

The clauses that end up in court

Tony: That actually leads into my next question. Are there clauses — and it might be the lack of a clause, or it might be too many clauses, as you say — are there clauses and areas that cause the most issues generally?

John: Well, the obvious one is non-payment or late payment: franchisees claiming that they haven’t got enough money, they’re not making enough money, so they can’t pay. And to a lesser extent, franchisees complaining about a lack of support from the franchisor. Because, especially in well-established franchise businesses, franchisees know a lot about their business, and franchisors send inexperienced people to visit the franchisees to give them guidance — well, actually, the franchisee knows a lot more than the person the franchisor sends. It’s that sort of thing that really irritates franchisees.

Tony: And things like restrictive covenants, post-termination clauses — how do these stand up if they’re tested?

John: Okay. Well, it is absolutely standard in franchise agreements for there to be an in-term non-compete. So the clause would say: you can’t be involved in a competing business whilst you are a franchisee of ours. Those are not problematic; those are enforced.

The problem is post-termination. So you terminate the franchise agreement, or the franchise agreement expires and is not renewed. You really don’t want your ex-franchisee taking the signs down and operating as an independent business, using all of your know-how — having built up its business using that know-how and your brand. And so post-termination non-compete covenants in franchise agreements are standard. Now, up until recently, a 12-month non-compete covenant in a franchisee’s territory would be upheld. And then the Drain Doctor decision came along and changed everything, and the Court of Appeal said: oh no, no, that’s too simplistic an approach. It’s much more complicated than that.

Tony: Sorry, John — what would be the summary of the Drain Doctor case, for those who don’t know it?

John: Well, the summary is: there’s a franchisor who pursued a franchisee whose business had failed, for no really good reason. And the sympathy of the court was with the franchisee and not the franchisor. It was a case where the franchisor was trying to enforce a post-termination non-compete covenant on this franchisee that had not been a good franchisee. And the judge said: why are you bringing this case? I think the only possible reason was that the franchisor wanted to send a message to the network, which is: if you step out of line and cause us problems, we’re going to litigate, and we’ve got deeper pockets than you.

Tony: And so what will be the implication of that, in future cases?

John: Well, the implication is: if you’ve got an old-fashioned non-compete clause, 12 months in the territory, you need to get that rewritten by your lawyer, so that it reflects the provisions of Drain Doctor. I think, Tony, I’m happy to do it, but probably people would die of boredom before I finished if I summarised all the changes that are required.

Terminating a franchisee

Tony: No, let’s not do that. I’m sure they can contact you and talk about these things in more detail — we’ll talk at the end about how people might contact you. So, turning towards, I guess, the more difficult end of things: terminating a franchisee. I guess that can be done for various reasons, but where does that typically go wrong, and what does it cost a franchisor?

John: Well, terminating a franchisee ought to be a simple process. There’ll be a clause in the franchise agreement that says we can terminate immediately if these really bad things happen, or we terminate on notice if the less awful things happen.

Now, the real danger is: you terminate a franchisee that’s done bad things, the franchisee goes and sees a lawyer, the lawyer says “possible misrepresentation claims”, or “the franchisor didn’t have the right to terminate”, and then you get involved in litigation. And you want to avoid litigation almost at all costs — principally because of cost.

So even if you firmly believe you have the right to terminate for a franchisee’s breach, it is always better to do a deal with the franchisee. Because if you simply terminate, the franchisee loses all of its investment in the franchise business — effectively, generally speaking, you can take it over, and you’ve got restrictive covenants that prevent them from operating the business going forward. So do a deal. Do a commercial deal where, for instance, you might offer to sell the franchise on behalf of the franchisee and give some of the sale proceeds to the franchisee. A commercial deal will save you shedloads of money, and shedloads of wasted management time.

Tony: That’s great advice. However — playing devil’s advocate — if a franchisee decides they don’t want to leave, keeps trading, keeps the customers, that sort of thing — how does that generally play out?

John: Well, generally, if a franchisee does what you’ve described, the franchisor has a choice of going to court and applying for an injunction, preventing the franchisee from doing the things that the franchise agreement says he or she must not do. Now, the problem with that is injunctions cost £30,000 plus. And even if you as a franchisor are successful with an injunction, you don’t get your legal costs at that stage, because it’s considered to be an interim stage. So you have to be quite rich to seek an injunction. The alternative is simply to bring a damages claim — but that’s litigation, and those costs will mount up in a way that’s horrific.

Tony: So it goes back to your original advice: try and make a deal where possible.

John: You bet. And it takes two to tango. So if you’ve got a franchisee who doesn’t want to tango, you can’t settle.

Money, fees and under-reporting

Tony: So, again turning to some of the more detailed aspects: how often is the fight actually about money — things like under-reporting or unpaid fees, which you mentioned at the start? Is that the most common?

John: Well, it’s certainly common. Whether it’s the most common — it probably is: non-payment, delayed payment, fiddling around with the fees. Bear in mind that most continuing fees in franchise agreements are taken as a percentage of turnover. So the lower the turnover, the lower the fees the franchisor gets and the franchisee has to pay. In cash businesses — so, fast-food outlets, for instance — you would expect the franchisee to receive quite a lot in cash, and you would expect the franchisee not to declare all of that. And I think you sort of need to be grown-up about it. Do you just accept that that’s the case, or do you get stroppy? It’s quite difficult to prove that cash transactions have not been recorded. It’s possible, but quite difficult.

Now, an alternative, if you’re a cash business, is to have a fixed fee. But generally, fees based on turnover work better.

When the network organises

Tony: So you’re saying really a bit of give and take is reasonable — a reasonable approach, not necessarily something you welcome. Now, another problem — sorry to concentrate on problems, but we’re talking about disputes: what happens when you get a network-wide issue? I don’t know if you’ve come across this, but where many franchisees start to revolt, if you like?

John: Well, let me tell you, that happens often, Tony. And it happens particularly often in the internet age, where franchisees email each other on a constant basis. And in a sense the cost of litigation encourages a group of franchisees getting together, because at least if there’s a group they can share the legal costs. So I’m seeing that a lot.

Now, it’s back to a point we discussed earlier. If you’ve got a load of happy, profitable franchisees, they’re not going to want to join the group. It’s only if they’re unhappy — usually because they’re not making enough money — that they would join the group. So the trick, easy to say, difficult to do: make sure your franchisees make lots of money.

Staying out of court

Tony: That’s good advice. Right, and then I think my final straight question — I do have one question I might add at the end — staying out of court. You indicated that court is expensive, litigation is expensive. How do you judge that fine line where you think, “do you know what, I really do need to go to court”, or is it really “at all costs”? What sort of things sway your mind as an adviser?

John: Well, it is quite common in a franchising context for franchisors to believe that they have to send a message to the rest of the network. They fear that if they allow a franchisee to get away with it, then all the other franchisees will want to get away with it. And lawyers often use that argument to encourage franchisors to take action.

I’m not sure that I see much of that. I mean, if you’ve got a happy franchisee, just because Joe Bloggs down the road has “got away with it”, in quotes, doesn’t mean that you immediately want to terminate the franchise agreement. So I’m not wholly convinced about the “sending the message to the network” argument.

I’m also concerned about franchise lawyers encouraging their clients to litigate. The only people who win in litigation are franchise lawyers. And unless you are very unusual and want to make your lawyer richer than he or she already is — don’t take that advice. It’s bad advice.

Tony: So — obviously I’m tying this back to your BFA position, maybe — how does mediation, arbitration, BFA processes, fit into the picture of trying to avoid getting into court?

John: Okay. Well, this is something that my firm initiated: a dispute resolution process in our franchise agreements, and it’s been copied by virtually all franchise lawyers. If there is a dispute, the parties first of all have to sit down together in a face-to-face meeting. If that doesn’t resolve the issue, the parties have to refer it to mediation.

Now, generally I don’t use BFA mediation; I use what’s called CEDR mediation — C-E-D-R — because they’re real experts in mediation. A common mistake about mediation is that the mediator decides who’s right and who’s wrong. That is not part of his role. The role of the mediator is simply to find a commercial solution to the dispute. There is a very high success rate of positive results from mediation — I mean, we’re talking 80, 90 percent. And the advantage of mediation is the result is private; it’s not public. So other franchisees, technically, are not supposed to know about it. And the other big advantage is it’s relatively cheap in comparison to litigation. It can be as little as something like a thousand pounds for a day, shared between the two parties. It can be up to five thousand pounds a day. But let me tell you, in comparison to litigation, that is really cheap.

The most expensive mistake

Tony: I imagine. Okay, well, I’ve got a couple of tiny little questions at the end I was going to throw in, just for fun. What is the most expensive mistake in disputes that you’ve ever seen a franchisor make — what was it, and what should they perhaps have done differently?

John: Right on the spot — you can tell you’ve put me on the spot. I think the most expensive mistake is pursuing franchisees for no good reason. Is it really worth litigating for £50,000 worth of alleged damages? Curiously, I’m dealing with a franchisor with at least two brands who is doing precisely that, and I’m at a complete loss as to why this franchisor is doing it. Because even if he wins, he’s not going to get the legal costs back. He’s going to get a tiny sum of money, and he would pay much more to his lawyers. So just think long and hard before you start a litigation process as to whether it’s worth it.

Tony: I was actually going to ask you: if a franchisor could take one thing from this conversation, what should it be? But I think you’ve almost just answered it there — think long and hard.

John: Yeah. And I often hear franchisors saying “what we want is a really aggressive lawyer”. Let me tell you, that is the last thing you want. Because in my experience, when I’m dealing with a really aggressive lawyer on the other side, it’s either because they don’t know the law and they’re trying to cover it up with being aggressive, or because they’re idiots, and they think that being aggressive covers up their idiocy. But it doesn’t.

Tony: Well, what’s very evident, John, is you’re no idiot.

John: Not everybody would agree with that.

Tony: So that’s John Pratt of Hamilton Pratt. I’m sure if you wanted to contact John about any aspect of legal and franchising, he would welcome that. But thank you very much, John — that was really interesting.

John: Well, I’m sure it wasn’t, but it’s been a real pleasure. Thank you, Tony.

Recorded over Microsoft Teams on 23 September 2026. Transcript lightly edited for clarity. The "Drain Doctor decision" is Dwyer (UK Franchising) Ltd v Fredbar Ltd [2022] EWCA Civ 889, in which the Court of Appeal held a 12-month post-termination non-compete covenant in a Drain Doctor franchise agreement to be unenforceable.

John Pratt is the founder of Hamilton Pratt, the largest specialist franchise law firm in Europe, which acts for around 40% of the full members of the British Franchise Association. He was the BFA's legal adviser for six years, is the author of the textbook Franchising: Law & Practice, and has chaired the International Bar Association's international franchise committee.

Related reading: our conversation with Ken Rostron on development plans · our conversation with Clive Smith on franchise recruitment · real-time data for franchise decisions