What Happens After Franchise Agreement Ends

(a) This option can only be exercised if the franchisee informs the franchisor in writing of the exercise of this option and such notification is given at least three (3) months and no more than six (6) months before the expiry of the period (or, if applicable, the current extension period) and the deadline is essential for the deadlines set out in this sub-clause. A lot of attention is paid to what happens before and at the beginning of a franchised relationship, but what happens when it ends? Sometimes, when a parent company terminates a franchise agreement because of something you did as a franchisee, you might have to pay money for termination. In other words, the company can sue you for damages for violation or violation of the terms of the contract. You may also be forced to pay for an early termination, even if the company initiated it because you did something wrong. The franchise agreement often provides that the franchisor has the opportunity to acquire at fair value the company`s assets (equipment, fittings, vehicles and other assets). This often corresponds to book value. There will be no obligation for the franchisor to pay anything for the value of the business, so the franchisee will be in a very weak position once the maturity has expired. It is important to remember that the franchisee has the right to answer these questions well before the end of a temporary franchise. If this is not the case (or in the right way), a civil penalty could result in a violation of Article 18 of the Code of Conduct. Sometimes trade clauses are too restrictive and cannot be enforced. There are also limited circumstances in the franchise code of conduct that allow franchisees to circumvent the restriction of commercial clauses if they have attempted to renew the franchise agreement without success.

However, in most cases, the trade clause is limited and you have to take it seriously. Look for legal advice if you`re not sure. Jeff Fabian is the franchise and brand lawyer and represents both start-ups and active franchisors. It is available at 866.545.7859 or online at www.fabianlegal.com. You can also follow Jeff on Twitter @jsfabian. If you decide not to renew the franchise agreement or sell your business to a third party or franchisor, you are subject to a multitude of obligations after termination.