Most New Jersey businesses have struggled over the past few years. Profits have been down, and costs have gone up. In some ways, franchises have had an easier time: The franchisor takes care of some big decisions and expenses. The franchisee is free to focus on making the business successful. However, an increase in the number of disputes between management and owners shows that this hasn't always been the case.

In the past, individual franchisors have felt at a disadvantage in disagreements with management. As a result, these business owners are banding together to boost their bargaining power. To business analysts and historians, it's an interesting turn of events; many liken the trend to the rise of labor unions.

One recent lawsuit illustrates the changing dynamic. An association of 185 owners of individual Cold Stone Creamery stores is accusing the parent company of not providing detailed information about marketing funds. The owners also want to know how management is handling the revenue and interest earned through unused gift cards.

Association members say they are paying more and earning less every year. According to court documents, the average store's revenue dropped from $400,000 in 2005 to $352,000 in 2011. What the numbers don't say is how much of the loss can be attributed to the recession rather than to the franchisor's poor decisions. Industry figures show that Cold Stone's system-wide revenue declined 1.1 percent from 2010 to 2011.

The strategy of addressing issues as a group has proven effective. In our next post, we'll discuss a couple of cases where the associations prevailed.

Source: Wall Street Journal, "Tough Times for Franchising," Sarah E. Needleman, Feb. 9, 2012