A franchise agreement is a contract – and those contracts eventually expire, even if that is five, 10 or 15 years down the road.
At that point, you generally have the option to renew your agreement with the franchisor, but only if you meet all of the renewal conditions. To make sure you keep your own plans on track and protect your financial future, here are some tips:
1. Recognize that renewal is not guaranteed
No matter how long you’ve been operating as a franchisee, renewal of your agreement is not automatic. It’s your burden to make sure that you make a timely request for renewal, pay whatever renewal fees are required and continue to meet the franchisor’s standards.
If you’re interested in renewing your franchise agreement, make sure that you maintain high-performance standards. Tracking your success can help you show the franchisor exactly what value you have (and encourage them to make concessions to keep you).
2. Do your homework and evaluate the market
Even if you are certain that your performance as a franchisee has been acceptable, you do not want to blindly rush into a renewal.
Before you make that commitment, take the time to review your current contract, assess your business’s performance and look at the existing market conditions for your industry. That can help you negotiate more favorable terms during renewal discussions.
Many disputes between franchisees and franchisors are related to denied renewals. If your franchisor feels that you’ve done something that’s a detriment to their brand or considers you an “underperformer,” they may not be willing to proceed with the renewal, but you may be able to dispute the decision. Legal guidance can help you both get through a franchise renewal with greater ease or challenge the franchisor’s denial.
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.