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Whether you are contemplating terminating your contractual relationship with one of your franchisees, or if you have already decided to end the franchisee’s rights, a franchise termination lawyer from Franchise.Law can provide the legal guidance you need for a smooth transition and to avoid post-termination problems.
Our lawyers represent franchisors across the United States on transactional legal matters involving their operations, including termination and the franchisee’s remaining rights and obligations after the relationship ends. State franchise relationship laws affect how and when a franchisor may terminate, and we advise franchisors on those requirements nationwide.
Before you notify a franchisee that you are ending the franchise relationship, you can reduce problems and challenges by reviewing your contractual rights with an experienced franchise termination attorney from Franchise.Law. Our attorneys can conduct a thorough assessment of your Franchise Disclosure Document (“FDD”) and your rights and obligations under the franchise agreement your franchisee signed. More critically, your lawyer can confirm that the franchisee is in default under the agreement’s terms and evaluate whether you have “good cause” to terminate under any state franchise relationship law that applies. Good cause might include, for example:
State relationship laws, as well as the terms and conditions in your franchise agreement, often require you to provide your franchisees with notice and an opportunity to correct the issues before you proceed with termination. Your lawyer can explain the notices that you are required to give and how a franchisee’s post-notice efforts might impact your termination decision.
Termination of a franchise relationship does not erase a franchisee’s knowledge about your business and operations. A well-drafted franchise agreement includes confidentiality obligations and post-termination non-compete covenants that restrict a former franchisee from using that knowledge or competing for a set period in a defined area. You will need to remain vigilant to protect the value of that information.
You will also need to enforce the former franchisee’s other post-termination obligations, including de-identifying the location, transferring phone numbers, websites, and social media accounts, returning the operations manual and customer data, and paying any amounts still owed. If your franchise agreement gives you an option to purchase the business assets or take over the lease, those decisions often carry short deadlines.
In some situations, a franchisee might argue that you also breached your obligations and, as a result, are not entitled to a “for cause” termination. To reduce your risk of this challenge, ask your lawyer to review your records and communications with the franchisee to detect potential disagreements. Identifying those problems before you issue a termination notice will give you an opportunity to resolve them through negotiation, or to end the relationship with a mutual termination agreement, rather than dealing with them in costly arbitration or litigation.
In every situation, you need to remain aware of how state franchise laws might affect your decisions. Those laws often provide greater protections for franchisees, and your failure to comply with them can change the trajectory of the termination. Again, your franchise termination lawyers can evaluate how those laws will impact you.
The decision to end a franchisor-franchisee relationship should never be made without full consideration of all potential legal ramifications. For assistance in identifying and addressing all consequences, please call Franchise.Law to speak with a knowledgeable franchise termination lawyer. We have more than 15 years of experience in representing franchisors in franchisee termination matters, and we can provide the guidance you need to execute a smooth termination with a minimum of problems.