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Navigating the Termination of Franchise Agreement: A Guide for Franchisees

Lawyer negotiating termination of franchise agreement

As a franchisee, you may have put in countless hours and hard work to establish your business. However, there may come a time when you need to consider terminating your franchise agreement with your franchisor. This can be a complicated process, and it is important to understand your rights and obligations. In this guide, we will discuss the termination of a franchise agreement by a franchisee and provide insights on how to navigate this process.

Terminating a franchise agreement can be a complicated and intimidating process. As a franchisee, you may feel like you’re stuck in an unbalanced and unfair relationship with your franchisor, and the thought of ending that relationship may seem impossible. But it doesn’t have to be that way.

It happened to a client of ours. We helped this client (a prospective franchisee) review the FDD and Franchise Agreement (if you don't know what "FDD" stands for head over to our blog post titled "A Consumer's Guide to Buying a Franchise"). Everything was going great for our franchisee client, until it wasn't. A franchisor franchisee dispute began when our client, unfortunately, was unable to acquire some necessary governmental approvals. The franchisor agreed these approvals were necessary, and (in the franchise agreement amendment - that we negotiated) the franchisor agreed to terminate the franchise agreement and refund the franchisee if those approvals could not be obtained.

Unfortunately, the franchisor made this franchisee's life miserable. They refused to refund the franchise fees, and even called the franchisee a liar (note that our client deposited over $75,000 with this franchisor, funds which were to be held in escrow for the franchise agreement). Only after Lopes Law got involved were we able to get the franchisee a full recovery of their franchise fees and a termination of franchise agreement.

At Lopes Law, we understand how to navigate the termination of franchise agreements. We are here to provide guidance and support to help you through this difficult process. In this guide, we will go through what you need to know before terminating a franchise agreement, the different ways you can fulfill your obligations as a franchisee, and how we can help make sure that everything is resolved fairly.

We will also equip you with the knowledge you need to protect your rights as a franchisee and ensure that all elements of the termination process are legally sound. So let’s get started!

Overview of Termination of Franchise Agreement

Understanding the Franchise Agreement

The franchise agreement is a legal contract that outlines the terms and conditions of your relationship with your franchisor. It is essential to understand the details of your franchise agreement and the termination clause before taking any action. The termination clause typically outlines the circumstances under which the franchise agreement can be terminated, the notice period required, and the consequences of termination.

Reasons for Terminating a Franchise Agreement

There can be several reasons why a franchisee may want to terminate their franchise agreement. One of the most common reasons is a breach of contract by the franchisor. For example, if the franchisor fails to provide the necessary support and training, or if they fail to meet their obligations under the franchise agreement, you may have grounds for termination.

Another common reason for terminating a franchise agreement is a change in circumstances. This could include a change in your personal situation or a significant shift in the market. If these changes make it impossible to continue operating your franchise, termination may be the best course of action.

Terminating a franchise agreement can be a complex process, especially if the franchisor disputes your reason for terminating it. There are two main ways to end a franchise agreement: with or without cause.

Termination Without Cause