Buying into a franchise can be a shortcut to business success. You get to make money off of an established brand with a loyal customer base. You benefit from investments made by the parent company into product development and advertisement, and you likely have a network of other franchise owners who can help you navigate the process of running your new business.
Unfortunately, not all franchise contracts lead to business success. To protect yourself, you need to identify when a contract doesn’t work for you. What are some of the reasons why a franchise owner may want to cancel their franchise contract?
When the company wants to increase franchisee obligations
The franchisor or company granting other individuals and businesses the right to operate under their name retains certain authority in a franchise agreement. Typically, they can require that franchise owners invest in their company.
Requiring updated machinery or remodeling projects can help keep every franchisee’s location in line with corporate standards, but those demands can also stress the people actually running those locations. If you have already invested substantially in equipment or facilities and face increasing or repetitive investment demands, it may be time to consider ending the franchise agreement.
When the company no longer supports your franchise
For there to be benefit in you paying substantial fees to the franchisor, they need to invest not just in the brand overall but in your local market. If the company has stopped advertising locally or doesn’t invest in your region the way they do in others, you may have to reconsider whether your investment would also better be spent elsewhere.
When there has been a change in culture or company focus
Perhaps you bought into a certain franchise because of the way they represented their services or treated their staff members. You like the idea of running a similar business yourself because you saw it as ethical or sustainable.
However, new management at the franchisor’s company could result in you feeling unaligned with the business, its practices and its long-term goals. When there has been a major shift in values or practices either by the franchisee or franchisor, it may be time to end the franchise agreement.
Recognizing when a franchise arrangement is not working and taking the right steps to address those issues can help protect franchise operators from expensive franchise contract disputes in the future.
*NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.