Suffolk County’s Franchise Agreement Litigation Wave: How Post-Pandemic Business Model Changes Are Triggering Legal Disputes in 2025

Suffolk County’s Franchise Agreement Litigation Wave: How Post-Pandemic Business Model Changes Are Triggering Legal Disputes in 2025

As 2025 unfolds, Suffolk County is experiencing an unprecedented surge in franchise agreement litigation, driven by the lingering effects of pandemic-era business model changes and evolving regulatory pressures. Franchising growth is a leading driver of the U.S. post-pandemic recovery, with the industry accounting for nearly 3% of GDP, yet this growth has come with significant legal challenges that are reshaping the franchise landscape across Long Island.

The Perfect Storm: Post-Pandemic Changes Meet Legal Scrutiny

The pandemic fundamentally altered how franchise businesses operate, from remote work arrangements to digital service delivery models. These changes have created a complex web of legal disputes as franchisors and franchisees struggle to adapt their agreements to new realities. COVID‑19 aftermath: Backlogs and remote hearings continue to influence court procedures, with some observers expecting a surge in business disputes related to pandemic-era contract breaches.

There were a number of important and potentially impactful developments in 2024 that we predict will continuing developing and trending in 2025. The below lists a few additional trends from 2024 to watch that will impact franchise law. Key areas of dispute include territory modifications due to delivery service expansions, technology integration requirements that weren’t anticipated in original agreements, and operational standard changes implemented during the pandemic.

FTC Rule Amendments and Regulatory Pressure

The Federal Trade Commission’s ongoing efforts to reform franchise regulations are adding fuel to the litigation fire. The Federal Trade Commission’s (FTC) efforts to amend the FTC Franchise Rule (the Rule) will continue in 2025. While we continue to expect some changes to the current disclosure requirements, and we suggested some changes to the FTC in response to its request for information (RFI), we anticipate focus in 2025 to be on efforts to add federal regulations governing relationship issues and not just to make changes to the existing disclosure requirements.

These regulatory changes are creating uncertainty for both franchisors and franchisees, leading to preemptive litigation as parties seek to clarify their rights and obligations under evolving standards. Perhaps most significantly, the American Franchise Act would have allowed the Federal Trade Commission (FTC) and state attorneys general to enforce franchise relationship laws, not just disclosure violations under the existing Franchise Rule. That change would represent a major expansion of federal authority into day-to-day franchise relationships, giving regulators more power to intervene when disputes arise.

Joint Employer Liability Concerns

One of the most contentious issues driving litigation in 2025 involves the classification of franchisees as independent contractors versus employees. Some of the factors, such as whether the worker relies on training provided by the company, whether the company uses technological means to supervise the worker, whether the company prevents the worker from working for someone else and the extent that the work is integral to the company’s business, could be argued to be present in almost all traditional franchise models. In light of this new test and its factors, franchisors may find they are misclassifying their franchisees as independent contractors and therefore face increased liability under the FLSA for not providing the required benefits to franchisees, such as minimum wage and overtime pay.

This shift in legal standards is forcing franchise systems to reevaluate their operational control mechanisms, often leading to disputes over contract modifications and compliance requirements.

Common Franchise Disputes in Suffolk County

Suffolk County’s Commercial Division is seeing a variety of franchise-related cases, including:

  • Territory Disputes: Franchise agreements usually grant franchisees an exclusive territory in which to operate their business. If there are disagreements over territorial rights, it can lead to litigation
  • Termination Issues: If a franchisor terminates a franchise agreement, either for cause or without cause, it may trigger legal action from the franchisee
  • Non-Compete Enforcement: Franchise agreements may contain non-compete clauses that restrict franchisees from operating a similar business in a certain area for a certain period of time after the franchise agreement ends. If these clauses are too restrictive, they can lead to litigation
  • Disclosure Violations: Increasing scrutiny over franchise disclosure documents and compliance with evolving FTC requirements

The Cost and Complexity of Franchise Litigation

Franchise arbitration or litigation (“dispute resolution”) is costly and complex for both franchisees and franchisors for several reasons: Complex legal issues: Franchise dispute resolution involves a complex mix of contract law, legal compliance, antitrust law, and intellectual property law. These legal issues require specialized knowledge that only experienced franchise attorneys possess. Large franchisor resources: Franchisors often have substantial resources and legal departments to defend themselves in disputes.

The specialized nature of franchise law requires attorneys who understand both the business relationships and the complex regulatory framework governing franchise operations. Franchise agreements tend to strongly favor the franchisor. Having an attorney in your corner will help make sure your transaction is fair and you’re well represented. They will review the terms of your agreement and advise you of its meaning so you are fully aware of the parameters of the relationship with the franchisor.

Why Suffolk County Businesses Need Experienced Legal Representation

Given the complexity of franchise litigation and the stakes involved, businesses facing franchise disputes need experienced legal counsel who understands both the local court system and the nuances of franchise law. A skilled commercial litigation attorney suffolk county can navigate the specialized procedures of Suffolk County’s Commercial Division while protecting your business interests throughout the dispute resolution process.

New York’s Commercial Division handles business disputes differently than regular civil courts. Judges expect sophisticated legal arguments, strict adherence to procedural schedules, and counsel who knows the rules. Procedural missteps get penalized. Missed deadlines have consequences. You can’t show up unprepared. The Commercial Division in Nassau and Suffolk Counties sees everything from simple contract disputes to multi-million dollar fraud cases.

Prevention and Best Practices

Stay up to date on changes in the law: Regularly review your franchise terms and update your franchise agreements and policies to ensure franchise compliance. Make sure that they comply with any new changes or updates in franchise or business law to avoid compliance issues in business. Maintain good communication with franchisees: Regularly communicate with franchisees and address any concerns or issues they may have. This can help prevent disputes and potential disputes.

For businesses looking to avoid costly litigation, Mediation is recommended for resolving franchise disputes because it is cost-effective, confidential, and quicker than traditional litigation or arbitration. Franchise business mediation allows both parties to work together with a neutral third-party mediator to find a mutually beneficial solution to the dispute.

Looking Ahead: The Future of Franchise Litigation

As franchise businesses continue to evolve in response to post-pandemic market conditions and regulatory changes, litigation trends in Suffolk County are expected to intensify throughout 2025. While franchising continues to face legislative, regulatory, and economic headwinds, the data suggests that franchising is far from doomed in 2025. If anything, franchising’s track record in 2024 demonstrates the business model’s remarkable ability to absorb shocks, recalibrate strategies, and seize new opportunities. The projected growth in franchise establishments, job creation, and overall economic output for 2025 underscores the enduring appeal and adaptability of franchising, even in the face of legal, political, and economic challenges and uncertainty.

Businesses operating under franchise agreements in Suffolk County should proactively review their contracts, stay informed about regulatory developments, and maintain open communication with legal counsel experienced in franchise matters. The litigation wave of 2025 represents both challenges and opportunities for those prepared to navigate the evolving legal landscape with proper guidance and strategic planning.