Exploring the Causes of Conflict in Franchised Restaurant Industry: Evidences from the Court Record

Relationships between franchisees and franchisors are susceptible to conflicts. Conflict is inevitable throughout its operation and expansion in restaurant franchising industry. This exploratory study employed a content analysis using a data triangulation of New York court records spanning from 1957 to 2016 and IFA corporate databases. This process produced 23 cases relating to restaurant franchising. A methodological tringulation of a manual coding and CAQDAS generated findings to identify restaurant business models involved in the lawsuits, categorize types of conflicts between franchisees and franchisors, determine the most prevalent cause of action that led to the lawsuits, and interpret the court's opinion, among others. Three coding matrices consisting of themes for types of conflict, themes for causes of action, and themes for court's opinions, were developed to guide the analysis framework. The findings revealed that the courts dismissed three lawsuits on the jurisdictional grounds at the preliminary litigation stage. Out of the 20 cases, the courts found that 13 cases filed by the franchisees had no meritorius causes of action. This leads to a belief that the franchisees did not obtain sufficient advice from their attorneys or they did not arbitrate their conflicts before filing the lawsuits. This dissertation proposes future avenues of research to address the limitations encountered in this study. The primary theoretical implication of this study is that parties in franchising may recognize the red flags in conflict before advancing to the litigation stage. This would help the parties of interest to mitigate the tension of their relationship. Among the practical implications of this study include the recommendation for a better franchising regulation which safeguards the interests of all stakeholders. Policymakers should consider mandating arbitration clauses in the franchising agreements in order to balance the relationship between franchisees and franchisors.