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The aftermath of franchise termination

On Behalf of | Jan 28, 2022 | Termination/Nonrenewal

For many entrepreneurs, opening a franchise business is the realization of a longtime goal. Hard work and sacrifice go into any type of business endeavor. However, the built-in benefits of owning a high-profile franchise are numerous, ranging from name recognition to advertising and marketing support on a regional or national level.

That dream that was realized can quickly turn into a nightmare when the franchisor suddenly terminates the agreement.

Limited options and future legal issues

Many franchise-related business contracts end due to a breach that cannot be resolved amicably. For many franchisees, the only option is reopening under a different name. However, the contract’s language could result in future legal problems for the franchisee looking to continue business operations instead of closing the doors.

Regardless of who initiated the termination, franchisees can face severe financial hardship, particularly if the franchisee’s contract mandates payments to the franchisor for damages over violation of the agreement. In some cases, the early termination clause may force payments through the end date noted in the contract, even if it wasn’t their decision to end the business relationship. The monetary burden only becomes worse if investments went into future advertising and marketing.

The benefits of legal help

Proactive steps can help prepare for an unexpected franchise agreement termination. While signing a contract without legal help saves money, the costs could be higher should the franchisor suddenly decide to violate the agreement or cancel the pact. An attorney going through all the legalese can help franchisees understand the contract and negotiate changes to the documents.

*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.