|| Author: Duncan Riley|

Terminating A Franchise Agreement

3. The franchisee must pay a replacement fee to the franchisee before the sale of the business Due to the difficulties encountered in proving a franchisee`s fundamental infringement, franchisees often turn to the misrepresentation law to see if this can offer a way out. With respect to franchising, misrepresentation is usually related to the fact that the financial forecasts for the franchise are clearly false or reckless by the franchisee. The misrepresentation must have prompted the franchisee to enter into the contract. Some agreements are quite complex and you would be well advised to consult a business lawyer before signing. State law may also apply. Most prevent dismissal, except for “reasons” defined by each state. There were philosophical arguments that came from an extreme where there were requirements for a franchise period to never stop, unless it was terminated for some important reason or by agreement to leave things as they are now. The existing franchise agreement is either awarded to the buyer or the buyer more often enters into a new franchise agreement with the franchisee.

There are several other avenues of recourse for both franchisees and franchisees to terminate a franchise agreement prematurely. Below are some commonalities, but other possibilities may be available depending on the situation. Some states have laws that state that a franchisee cannot terminate an agreement without “good reason” within the meaning of the law. For example, a franchisor should be able to prove that your franchise is not paying its license fees or advertising fees or that it is in some way violating health and safety requirements to terminate the agreement. As long as the franchise operates on a minimum standard, the agreement must remain intact. Prior to termination, did you attempt to resolve the dispute with the franchisee face-to-face or use the dispute resolution provisions of the Code and request mediation? Counsel for the franchisee argued that the minimum performance requirements should be those that are “appropriate.” The court decided that this was not the task of the Tribunal. It was time for the franchisee to propose the minimum performance requirements and it was time for the franchisee to accept them if that was the case. .

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