1851

Every franchisor is going to have unexpected expenses come up from time to time. Whether it be legal disputes with franchisees or <a href="https://1851franchise.com/top-5-tips-for-dealing-with-a-crisis-3377" style="text-decoration-line:none" target="_blank">a public relations crisis</a>, it is important that a brand is prepared for these expenses and makes a plan for what costs may occur. The best way for a franchise to withstand unforeseen expenses is to be in a solid financial state with an emergency fund in the bank and a high credit rating. To help prepare, here are some best practices every franchisor should keep in mind when creating a budget.&nbsp;

Always Be Prepared For a Crisis

Brands can&rsquo;t deal with a crisis on the fly&mdash;that&rsquo;s a recipe for disaster. Crisis management and budgeting may be one of the most important skills to learn and understand for a brand and franchise system. Once a PR plan is put in place, test it out and have crisis drills to see how it holds up and tweak your budget accordingly.&nbsp;

As the former in-house counsel to <a href="https://www.nutrisystem.com/jsps_hmr/home/index.jsp?utm_source=1851franchise.com&utm_medium=article&utm_campaign=saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected-2711082" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">Nutrisystem</a> 20 years ago, <a href="https://1851franchise.com/franchise-legal-players-nancy-lanard-senior-partner-at-lanard-and-associates-p-c--2709574" style="text-decoration-line:none" target="_blank">Nancy Lanard, a Senior Partner at Lanard and Associates, P.C</a>., got to see firsthand how expensive a PR crisis can become.&nbsp;

&ldquo;In the early 1990s, Nutrisystem was involved in a huge, national PR crisis after a customer <a href="https://www.washingtonpost.com/archive/local/1993/03/07/popular-diet-beset-by-puzzling-debate/d26968c7-1b52-43f3-b7bb-331f4466d84d/?noredirect=on&utm_source=1851franchise.com&utm_medium=article&utm_campaign=saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected-2711082" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">claimed that the product caused gallbladder disease</a>,&rdquo; said Lanard. &ldquo;The story ended up <a href="https://www.latimes.com/archives/la-xpm-1990-03-20-fi-827-story.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected-2711082" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">spreading all over the country</a> and resulted in over 500 lawsuits. We were on the national news every single night for weeks and the company had to hire outside PR counsel as well as a medical director just to handle interviews and television appearances.&rdquo;&nbsp;

While not every PR crisis is going to be massive, it can&rsquo;t hurt to plan for a major disaster. Have a crisis PR agency among your contacts, and build in the budget to hire one for when a crisis rears its head. &ldquo;Crisis PR is a specialized skill and it doesn&rsquo;t come cheap,&rdquo; said Lanard. &ldquo;Find the best crisis agency that fits your needs and budget for it.&rdquo;

Plan For Consumer Litigation

While a litigation budget can never be set in stone as each case will have its own complexities or difficulties, it is important to plan for the worst.&nbsp;

In Lanard&rsquo;s case, Nutrisystem ended up having to hire counsel for 500 lawsuits, including a separate paralegal just to go through and manage the mail. &ldquo;<a href="https://www.courtlistener.com/opinion/1828694/in-re-nutrisystem-inc/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected-2711082" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">Each of the 500 lawsuits had pleadings involved all over the country</a>,&rdquo; she said. &ldquo;None of the in-house attornies were litigators and we had one large firm in the Midwest that handled oversight nationally. When a company has lawsuits all over the country, they often have to hire local counsel, which gets very expensive.&rdquo;

According to Lanard, the costs of the entire experience were astronomical. &ldquo;No company can afford to litigate 500 lawsuits,&rdquo; she said. &ldquo;Nutrisystem was already financially weak, mainly due to the owners taking out substantial quarterly dividends that left no funds in reserve. In the end, Nutrisystem went into bankruptcy, resulting in massive layoffs. At the time, the brand was one of the biggest weight loss companies in the world, with over 13,000 locations nationwide.&rdquo;

Don&rsquo;t Forget About Franchisee Litigation

In franchising, where the relationship and obligations of a <a href="https://1851franchise.com/what-is-an-fdd--2705192" style="text-decoration-line:none" target="_blank">franchisor and its franchisees rest upon the terms of the franchise agreement,</a> it&rsquo;s inevitable that disagreements will arise. Despite the best efforts of the franchisor to resolve a franchisee dispute without resorting to legal action, there are instances where litigation may be necessary.

In the 1980s, <a href="http://www.fundinguniverse.com/company-histories/nutrisystem-inc-history/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected-2711082" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">another contentious battle was taking place for Nutrisystem</a>. A large number of franchisees felt gouged by the price of the food they were obliged to buy from the franchisor. The franchisees formed a federation that sought compromise, eventually resulting in a lawsuit filed against Nutrisystem that counted 280 of the 550 franchised centers as litigants in the antitrust suit.

While brands should be doing everything they can to avoid franchisee legal disputes like this, sometimes these costs can be unavoidable. &ldquo;Legal fees for a particular case are mainly a combination of two variables: the hourly lawyer rate and the number of hours worked,&rdquo; said Lanard. &ldquo;While this may seem simple, estimating the total amount for legal fees for litigation is a complex and challenging task.&rdquo;

No business can predict the future, but it can never hurt to be prepared. &ldquo;In today&rsquo;s world, you never know what expense is going to come up next,&rdquo; said Lanard. &ldquo;Through my experience, I&rsquo;ve seen how important it is to expect the unexpected when it comes to a franchisor&rsquo;s budget.&quot;

Saving for a Rainy Day: What To Set Aside in Your Budget for the Unexpected

1851 Franchise

Franchisors need to be aware of costs that may spring up when they least expect it, including those from a PR crisis or litigation.

saving-for-a-rainy-day-what-to-set-aside-in-your-budget-for-the-unexpected

Onigilly Japanese Kitchen

Koji Kanematsu Turned a 2,000-Year-Old Japanese Staple Into One of the Most Scalable Restaurant Franchise Models

koji-kanematsu-turned-a-2000-year-old-japanese-staple-into-one-of-the-most-scalable-restaurant-franchise-models

Lindora

Celebrating the Nurse Behind the Mission: How Melinda Endricks Is Powering Lindora’s Growth and Impact Nationwide

celebrating-the-nurse-behind-the-mission-how-melinda-endricks-is-powering-lindoras-growth-and-impact-nationwide

Sola Salons

Sola Salons Targets Chicago for Strategic Franchise Growth

sola-salons-targets-chicago-for-strategic-franchise-growth

Melting Pot

Photo of Melting Pot white chocolate fondue

How Melting Pot Franchisees Drive Year-Round Success Through Strategic Promotions and Local Marketing

melting-pot-franchise-year-round-success

Crust Pizza Co.

Crust Pizza Co. - Technology Piece - CTO Nick Fontenot - May 2025 - 1851 Franchise

Crust Pizza Co. Builds the Future of Franchising With Tech-First Strategy

crust-pizza-co-technology-nick-fontenot-cto

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

DoorDash Expansion Could Reshape Delivery and Operations for Franchise Brands - 1851 Franchise

DoorDash Expansion Could Reshape Delivery and Operations for Franchise Brands

doordash-acquistions-deliveroo-sevenrooms

Crumbl Franchise Investment - TSG Consumer Partners -  1851 Franchise

TSG Consumer Partners Takes Minority Stake in Crumbl, Signaling Franchise Growth Potential

crumbl-franchise-investment-tsg-consumer

Yum Brands Reports Strong Q1 Results with Big Boost from Taco Bell

yum-brands-reports-strong-q1-results-with-big-boost-from-taco-bell

QSR: McDonald’s Gains Momentum With Chicken Innovation, Value Deals and Franchisee Support

mcdonalds-franchise-recovery-chicken-strategy-value-deals-2025

The Future of Franchising: Trends and Predictions for 2025 and Beyond

the-future-of-franchising-trends-and-predictions-for-2025-and-beyond

Layoffs Surge to Pandemic-Era Highs, Opening Doors for Franchise Growth

layoffs-surge-to-pandemic-era-highs-opening-doors-for-franchise-growth

Restaurant Business: Crumbl Cools Its Expansion, Refocuses on Profitability

restaurant-business-crumbl-cools-its-expansion-refocuses-on-profitability

Franchisee spotlight image with Randy and Sandy Craft, Children's Lighthouse logo on blue background

The Crafts’ Successful Journey from New Parents to Children’s Lighthouse Franchisees

the-crafts-successful-journey-from-new-parents-to-childrens-lighthouse-franchisees

Franchisee spotlight image with photo of Robert Trujillo and UWRG logo on blue background

How Robert Trujillo Expanded His Construction Business With UWRG

how-robert-trujillo-expanded-his-construction-business-with-uwrg

District Taco Franchise Costs, Fees, Profit and Data for 2025

franchise-deep-dive-district-tacos-franchise-costs-fees-profit-and-data

The Ultimate Guide to Selling Franchises: Building Your Brand’s Growth Machine

ultimate-guide-to-selling-franchises

Saving for a Rainy Day: What To Set Aside in Your Budget for the Unexpected

MORE STORIES LIKE THIS