This could include a material breach by the franchisor if it has not remedied that breach within a certain period of time. Simply getting tired of all the hard work or being dissatisfied with the performance of the franchised unit is unlikely to be accepted by the franchisor as a reasonable excuse. That`s why it`s so important to make sure you`re making the right decision when signing a franchise agreement. Franchisors generally have greater flexibility in their ability to terminate a franchise agreement. Admittedly, there may be other conditions in the contract, including the legal and financial consequences of simply closing the store and abandoning the franchise. If the franchisee reaches the end of its fixed term without having violated any of the regulations, the contract ends. At this point, the franchisee can choose to leave or renew the contract. If they wish to renew the contract, franchisees are generally required to terminate the extension with the franchisor before the first contract expires. Or the franchisee could also renew the contract by signing a new franchise agreement on the same terms as the existing contract. Sometimes, although the franchise agreement does not expressly allow it, a franchisee can terminate the contract without penalty. This usually happens when there is bad blood between the franchisor and the franchisee and it is in the franchisor`s interest to reduce its losses and end the relationship.

Mutual termination of a franchise agreement may occur in cases where the franchisor has a fault, i.e. it has a defective supply chain, its support systems are sorely lacking, or it has otherwise admitted wrongdoing. I see mutual terminations with franchisors of all sizes, but they are rare. Before exploring this possibility, I`ll talk to a client about their relationship with the franchisor and review the franchisor`s process history to get a better idea of what to expect when initiating termination talks. Option. As mentioned above, you could face a significant financial claim or counterclaim from your franchisor if you terminate your contract incorrectly. Franchise agreements also contain restrictions on what a franchisee can and cannot do once the contract is terminated. Such clauses could prevent a franchisee from working in a competing or similar business for a period of time after termination. What happens after a franchise agreement is terminated depends on the reason for the termination. If you have breached the contract and the company has decided to stop doing business with you, you will be forced to close the store and do business under a different name. If your agreement has come to an end and the company simply wants to close the existing agreement and start from scratch with a brand new one, you may be able to do business under the same franchise name. It therefore appears that a franchisee may invoke an exception to the grant if the exercise of his activity as a franchisee would significantly deprive him of the chance of a profitable commercial activity, if that activity can be held liable by an objective analysis of the franchisor`s system.

The easiest and most common way for a franchisee to leave the franchise is to sell the business to another party. Most franchise agreements allow a transfer with certain restrictions. These restrictions typically include the following: There are various other remedies available to franchisors and franchisees to terminate a franchise agreement prematurely. .