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Conflict of interest between franchisor and lender

Date: 5/16/2021 12:23 PM (PST)

Early last year I was exploring to buy a franchise, I explained my financials upfront to the franchisor's rep, and plus franchisor recommended sole/in-house lender. We had many many many phone conversation and in most of them, I asked many time to please make sure I qualify and get the loan, as I don't have any other options to falls on, this loan is the only option I have to buy this. I provided 'documents' what the lender asked for to check and qualify, lender said after checking everything he sees no problem getting the loan done. I still was hesitant and still kept asking for please make sure and each time I was assured by the lender & franchisor rep. and each time I was assured not to worry, loan is no issue, they can get it done for me, without any issues and problems. Finally, I agreed and got the preapproval, signed FDD/franchise doc. etc.

To my surprise lender call me saying that my loan cannot be done, I asked why and I asked to give me in writing why not, he said I don't provide in writing reasons. Now I am obligated to the franchisor '$40,000' and which they want to pay. I like to ask is there something I can do, file a complaint on this conflict of interest, not working at Arm-Length, etc between the franchisor & Lendor.

I just learned after searching on line that lender has been working with the franchisor 'since 2014' as a consultant/coach to new & existing franchisee on behalf of the franchisor, now he is acting as a lender as well.  

Category: Business

Responses: 1

1 Reviews

946 Answers


Date: 5/18/2021 12:16 PM (PST)

Hello Shon. I’m sorry to hear of the complicated situation you find yourself in. Filing a complaint is a good first step. We will reach out to the business. We’ll ask that they address the allegations in your complaint and your proposed resolution. If we do not hear back from the business or they respond by refuting the allegations, then you will need to escalate your complaint to a higher authority. It is recommended with franchise businesses that you choose one that has been registered and approved by the Small Business Administration (SBA). It is also highly recommended that you find a lawyer familiar with the ins and outs of franchises. It is important to take into consideration franchise costs; operating licenses; renewal costs; and there may be upfront costs due to the franchisor that are non-refundable; so all the more reasons a lawyer should be contacted.

If you’re interested in filing a complaint through our office you can do that by clicking on the link here:

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