Pizzapirate,
How can you be a franchisee without a contract?
The franchise contractual relationship is defined and legally established by the Franchise Agreement (FA), which delineates what the requirements of both parties are, including the causes for and procedures for termination.
Right of 1st refusal and covenant “not to compete” clauses are pretty standard.
This should always favor the franchisor, as the franchisor is concerned mainly with the protection of its name, image, and operating system.
Somebody, somewhere back in time must have signed such a thing.
A local guy in a different food concept recently told the franchisor to “get lost” as he was receiving no real support, and he was really struggling. Turned out it was a franchise that once had a “big name” but had long since been operated professionally. They will probably never follow up on it, as the wheels seem to have pretty much fallen off the vehicle.
Another local guy, in the pizza business, closed down a regional pizza franchise, re-opened it 12 miles away as an independent, and he was served with a lawsuit, which resulted in a court injunction (required to close and stay closed until a certain date, probably related to non-compete covenant) and fines (may have been court costs, as I know my agreement states that loser pays). He was playing games, putting it in his wife’s name, etc. which didn’t stop the big city lawyers for a second. I was kind of surprised as I haven’t been all that impressed with that franchise, but they sure knew how to enforce their rights as a franchisor.
You need to do your homework here because there is potential for loss. If it’s a sorry franchise and they haven’t lived up to their end of the bargain, there are ways spelled out in the FA to address this, and ultimately dissolve the relationship.
If there is no FA (and you’re sure of this), then they could potentially be in big trouble for "operating a franchise without being a franchise (providing full disclosure in UFOC/FDD and having an FA) ". My understanding of this is basically if it walks like a duck, quacks like a duck, it is a duck. But it is amazing how the term “franchise” is generally thrown around without understanding the legal definition. (Many people aournd here thought that by opening a second store, I had franchised myself. How little did they know!)
Bottom line , if there’s a name, a system, fee (and or royalties), there’s a franchise. It is either operating legally (with UFOC/FDD provided prior to agreement, and properly executed FA) or illegally. (IMHO of course)
Best of luck!