Rights in a California Franchise Dispute

Updated August, 2026.

Franchise agreements establish important rights and responsibilities for both franchisors and franchisees, but disagreements can arise over how those provisions should be interpreted or enforced. This article discusses some of the options available for resolving California franchise disputes and explains why business owners should understand their contractual and legal rights before agreeing to a settlement or dispute resolution process. 

Key Takeaways

• Franchise disputes frequently involve disagreements over the interpretation or enforcement of franchise agreements.
• The franchise agreement is an important starting point for determining each party’s rights and dispute resolution obligations.
• Franchise disputes may be addressed through negotiation, mediation, arbitration, or litigation.
• Arbitration clauses, forum-selection provisions, and choice-of-law provisions can significantly affect how and where a dispute is resolved.
• Arbitration and mediation are different processes and can have very different legal consequences.
• Franchisees and franchisors should understand their rights before agreeing to a settlement or beginning a dispute resolution proceeding.
• A California business attorney can review the franchise agreement and help determine the appropriate response to a dispute.

Your Rights in a California Franchise Dispute

Many small business owners choose to open a franchise for various reasons. Franchise arrangements allow a new, inexperienced business owner to experience some of the benefits of small business ownership without having to completely “go it alone.” The franchisee – the small business owner – gets to use certain tangible and intangible property of the franchisor – in return for the payment of a franchise fee. Like other business contracts, however, the franchisor and franchisee do not always see eye to eye when it comes to the contract governing their relationship. As a small business owner, it is important to know that during these franchise disputes you have rights.

Rights of the Parties in a California Franchise Dispute

A California franchise dispute most often arises when the franchisor and franchisee cannot agree as to what the essential terms of the franchise agreement require each of them to do. Parties to a franchise dispute may choose to resolve their disagreement through one or more alternative dispute resolution methods (such as mediation), or they may choose to litigate the dispute.

Although parties who litigate their dispute generally have more rights than those who choose to settle their differences outside the legal system, the parties to a California franchise dispute have certain rights:

• The right to challenge (in court) the enforceability of a mandatory arbitration clause;
• The right to seek monetary damages from the other party if that other party is determined to have violated the terms and conditions of the franchise agreement;
• The right to contest the forum for resolving the dispute; that is, the right to ask a California court to determine whether the dispute should be resolved in California and according to California laws.

Many franchise agreements have clauses that appear to “require” the parties to resolve any dispute outside of court through arbitration or mediation. Doing so rarely benefits the franchisee. It is crucial, therefore, for small business owners involved in franchise disputes with a franchisor to have their franchise agreement reviewed by the experienced small business attorneys at JGPC Law before resolving their dispute through these alternative dispute resolution methods. Once a franchise dispute has been resolved through arbitration or mediation, any rights the aggrieved party may have had but failed to exercise are considered to have been given up, and there is usually very little that can be done if one party is later dissatisfied with how the dispute was settled.

Contact JGPC Law Today

At JGPC Law, our California small business attorneys are thoroughly familiar with the statutes and regulations that pertain to franchise agreements. We are committed to helping protect your legal rights so you can focus on building and running your business. We have helped numerous franchisors and franchisees successfully resolve their disputes in the San Leandro, Oakland, Fremont, Pleasanton, Danville, Walnut Creek, and Livermore areas. Contact JGPC Law for assistance at (925) 463-9600, or complete the firm’s online contact form for prompt and professional legal counsel.

Frequently Asked Questions

What causes franchise disputes?

Franchise disputes can arise from disagreements involving fees, royalties, territory, operating requirements, marketing obligations, contract interpretation, performance standards, renewal, termination, or alleged violations of the franchise agreement.

Does the franchise agreement determine how a dispute must be resolved?

Often, yes. Franchise agreements may contain provisions requiring negotiation, mediation, arbitration, or other procedures before a lawsuit can proceed. The enforceability and application of those provisions can depend on the agreement and applicable law.

Can a franchisee challenge an arbitration requirement?

In some circumstances, a franchisee may challenge whether an arbitration provision is valid or enforceable. Because arbitration law is complex and the outcome depends on the specific agreement and circumstances, the provision should be reviewed by an experienced attorney.

What is the difference between mediation and arbitration in a franchise dispute?

Mediation involves a neutral third party who helps the franchisor and franchisee attempt to negotiate a voluntary resolution. Arbitration generally involves presenting the dispute to an arbitrator who issues a decision, which may be binding depending on the applicable agreement.

Can a franchisee recover damages from a franchisor?

Potentially. Available remedies depend on the nature of the dispute, applicable laws, the franchise agreement, and the losses involved. A franchisee may have contractual or statutory claims that permit recovery of damages or other relief.

Does a California franchise dispute have to be resolved in California?

Not necessarily. Franchise agreements may contain forum-selection and choice-of-law provisions addressing where disputes will be heard and which state’s law applies. California law may affect the enforceability of certain provisions, making legal review important.

When should I contact an attorney about a franchise dispute?

It is generally advisable to consult an attorney early, particularly before terminating the franchise relationship, accepting a settlement, beginning arbitration, or taking other actions that could affect your contractual or legal rights.