What Happens When A Franchise Agreement Ends

What Happens When A Franchise Agreement Ends

Unless there is a separate agreement between you and your franchisor, certain sections of the franchise agreement govern the renewal or transfer of a franchise – or what happens if your franchisor decides that you have run your course in their system. This article provides an overview of some of the conditions, challenges, and opportunities that may be available to you when reviewing your renewal options. The basic principle that should be assumed is that the franchise relationship can last in the long run. There may be reasons for a relatively short period of time, such as. B the legal situation in the tied delivery of products, but most franchise agreements allow the franchisee to exercise a right of renewal. If the agreement does not grant a renewal right, a potential franchisee should proceed with caution. This may mean that the franchisor is not even willing to accept renewals or is trying to make the extension unreasonably expensive. Beware of agreements that grant a relatively short initial period with renewal fees for which additional fees are payable. If you choose not to renew, simply let the franchise agreement expire or sell your business to a third party or return to the franchisor, you will be subject to various obligations after termination. One of these obligations (where the franchisor requires immediate compliance) is to stop using the franchisor`s trademarks and trade dress and completely de-identify the business as a franchised outlet. While this may be less of an issue for home-based franchise opportunities (although you may still have business cards, social media accounts, and other identifying materials that need to be eliminated), it can be a significant effort for restaurants, fitness centers, daycares, and physical retail stores.

A competent franchisor will likely send a representative to your facility to “assist” them in the process or to inspect your work after completion. The only role they play is the approval of the new franchisee. You must go through a qualification process (just like you did when you were originally approved for the franchise) and meet all the necessary legal and financial requirements. On the other hand, franchisees sometimes want to renew their contract. How is a franchisee evaluated if they want to continue? In Australia, an amendment to the Franchise Code of Conduct earlier this year requires Australian franchisors to notify their franchisees of their intention to renew or not renew the agreement at least six months before the term of a franchise agreement expires. .

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