Invoking the franchise termination clause should be the last resort for a franchisor.
Has the franchisee been given the opportunity to remedy the breach as provided by law?
Or is the offense by the franchisee so severe that the franchisor has no choice but to implement the franchise termination clause in order to protect the brand?!
The franchise may also be terminated by mutual consent as discussed on our Termination of a Franchise page, which will not require a notice period by the franchisor.
Apart from terminating a franchise, the franchisor may choose not to renew a franchise, if given reasonable cause, such as persistent breach of the franchise agreement by the franchisee.The franchisor must keep record of notices issued to the franchisee of such breach during the initial franchise lifespan to support his refusal to renew.
The franchise agreement must clearly outline the obligations of the franchisee, so there is no misunderstanding as to breach of agreement by the franchisee which may cause the implementation of the franchise termination clause.
The law may compel the franchisor to give the franchisee time to remedy a breach, and the time allowed may vary from a few days to a few months. Examples of breach:
The above are guidelines and may differ in various countries or states. Consult with a franchise lawyer to advise on applicable laws in your area.
The franchisor may be torn between closing a problem franchise business and maintaining a presence in a territory, in the hope that the situation may resolve itself.
However, the very presence of such a business is often detrimental to the brand and other franchisees in the group.
Invoking the franchise termination clause may be much more beneficial to the franchise in the long run.
The franchisor is also bound by agreement as to his obligations and breach thereof may give cause to the franchisee to terminate the franchise.
The termination of a franchise should be aimed at protecting the brand, but not be so one-sided as to penalize the franchisee unfairly
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