Martin operates an ABC franchise. Recently, the franchisor has attempted to make changes to the contract that would increase Martin's costs so as to make the business unprofitable. The franchisor is engaging in
A) master licensing.
B) encroachment.
C) due diligence.
D) churning.

Question

Quizplus · Accepted Answer

Churning in the context of franchising refers to the practice by some franchisors of repeatedly reselling a franchise location to make profits from initial franchise fees and other startup costs, rather than focusing on the long-term success of the franchisee. When a franchisor attempts to make changes to the contract that would increase the franchisee's costs and potentially make the business unprofitable, it could be seen as an attempt to churn the franchise by setting the stage for the franchisee's failure and a subsequent resale of the franchise.

Martin Operates an ABC Franchise