What Happens After a Franchise Agreement Is Terminated in Georgia

When terminating a franchise agreement, the franchisor must enforce the post-termination obligations outlined in the contract and may take action against the franchisee to ensure compliance in the event of violations. The specific terms of the franchise agreement, federal law, and the state’s statutes govern the consequences for both parties.

Our skilled franchise termination attorneys could help you understand what happens after a franchise agreement is terminated in Georgia and provide invaluable assistance throughout the termination process to protect your brand and system. We could help you navigate the process correctly, reduce legal risks and potential financial liability, and defend against claims of wrongful termination or unfair trade practices.

What Are the Common Grounds for Franchise Agreement Termination?

In Georgia, the conclusion of a franchise contract is primarily determined by the terms of the contract itself, as the state does not have a specific franchise relationship law regulating the process. However, special state and federal laws can impact terminations, and the Federal Trade Commission Franchise Rule requires franchisors to include clear termination, renewal, and dispute resolution details in the Franchise Disclosure Document.

Either the franchisor or the franchisee can initiate termination—or they can mutually agree to it—but termination always requires careful adherence to the contract terms to avoid legal and financial penalties. A franchisor typically has the contractual right to terminate an agreement for cause, based on specific actions or inaction by the franchisee. Common grounds to terminate a franchise agreement include:

• Abandonment: Neglecting or abandoning the franchise location
• Non-payment of fees: Failure to pay royalties, advertising fees, or other required payments on time
• Conviction of a crime: A franchisee’s conviction for a felony or another crime that harms the brand’s reputation
• Material misrepresentation: Providing false information or making material omissions during the franchise application process
• Insolvency or bankruptcy: A franchisee filing for bankruptcy or becoming insolvent, which could trigger an immediate termination clause in the agreement
• Danger to public health or safety: The franchisor’s determination that continued operation of the franchise poses an imminent danger to the public, which can cause immediate termination
• Breach of contract: A material breach of the franchise agreement, such as violating brand standards, failing to follow operational guidelines, or misusing proprietary information or trademarks

A franchisee’s ability to terminate an agreement early is usually more limited and dependent on a material breach by the franchisor. If a franchise relationship is no longer profitable or circumstances change, parties often find that mutual termination is the most amicable solution to end it. For example, a significant change in either party’s circumstances, such as evolving business goals, could lead to a mutually agreed-upon exit.

As the state lacks a specific franchise relationship law, a franchise agreement’s termination provisions are generally enforced as written. The franchise agreement should dictate the specific conditions and processes for termination, including notice requirements, cure periods, and post-termination obligations. Before taking any action, consult our experienced franchise attorneys at Franchise.Law to understand the ramifications of termination in Georgia.

What Happens After Terminating a Franchise Agreement?

Terminating a franchise agreement triggers significant legal and contractual obligations for both the franchisor and franchisee in Georgia. For the franchisee, common post-termination requirements include the following:

• De-branding: The franchisee must immediately cease all use of the franchisor’s trademarks, trade dress, and other intellectual property, which includes removing signage, rebranding the business location, and ceasing to use any company email addresses or websites
• Non-competition: The agreement likely contains non-compete clauses that prohibit the former franchisee from operating a competing business for a specific period of time within a certain geographical area; however, state law subjects franchise contract non-compete clauses to strict scrutiny
• Non-solicitation: Non-solicitation clauses prevent the former franchisee from soliciting the franchise’s customers, employees, or other franchisees after termination
• Debt payment: The franchisee typically must pay all outstanding fees and debts owed to the franchisor and its affiliates
• Return of materials: The franchisee must return all confidential information and proprietary materials, such as operations manuals
• Asset transfer: The franchise agreement may contain a “collateral assignment of lease” provision, which gives the franchisor the right to take over the business location’s lease

State laws regulating certain industries, such as motor vehicle or marine product dealerships, may require the franchisor to repurchase inventory from the dealer in some situations. The franchisor must follow any notice requirements stipulated in the agreement and by federal law.

Franchise terminations could lead to legal disputes, so it is vital to have an attorney assisting you before, during, and after the process. Franchise.Law is a Charlotte, North Carolina-based firm, but we provide franchise law services across the country by operating under multi-jurisdictional practice rules.

This allows us to represent clients in matters governed primarily by federal law. Our firm focuses on federal franchise law and multi-state compliance. Although we are not licensed to practice Georgia law, we could still represent franchisors in that state under federal regulations and provide guidance on the process of ending a franchise contract.

Call Our Attorneys for Help After a Franchise Contract Termination in Georgia

What happens after a franchise agreement is terminated in Georgia can be challenging, particularly if legal disputes arise from the terminated franchisee. Our franchise attorneys at Franchise.Law could build a strong legal foundation from the start by drafting and updating the franchise agreement to prevent future disputes.

We could also ensure that we handle terminations, renewals, and territory changes carefully to safeguard your business interests. Request your one-on-one case consultation today.