Franchising no doubt is a successful formula for the expansion of a proven business. However, there are instances of termination of a franchise agreement. Let us find out
Franchisee pays royalties to the franchisor, expands his business, provides assistance in maximising growth and profits, and promotes his brand name. Still there are a numbers of occasions when the franchisees are terminated. Now the questions that arise are: Why franchise agreements are terminated? What are the causes responsible for this termination and what are the consequences? The most significant cause that leads to the termination is a non performing franchisee, or those that fail to come up to franchisors’ expectations in terms of profits and growth. Though the termination of the franchise agreements may differ from franchise to franchise but there are certain common causes responsible for these terminations. The article tries to figure out the most prominent situations that lead to termination of the franchise agreement.
Bankruptcy: Franchise agreement can be terminated if the franchisee or the franchise is declared bankrupt or declared to be insolvent by the judiciary.
Failure of franchisee: In case the franchisee fails to operate the franchised business for some days.
Wrong acquisition report: If the franchisor comes to know about material misrepresentation made by the franchisee in terms of profit generated by the franchised outlet.
Misconduct: In case the franchisee is found guilty for an offense, or has committed any criminal misconduct relevant to the operation of the franchise, that franchisor believes will have an adverse effect on the franchise system.
Noncompliance: In case the franchisor cured any default noticed by him in the franchisee but he engages in the same noncompliance, the franchise agreement can be terminated.
Change of contact detail: Franchise agreement can be terminated in case the franchisee does not inform franchisor about the change or discontinuance of use contact details with in some specified time. Failure to pay to the franchisor: In case the franchisee fails to pay any fee or other charges to the franchisor with in a specified time.
So, the article aims at alarming the franchisees to consider the above mentioned terms and conditions. If you found yourself not following this then wake up and start following these in order to keep your franchise agreement safe and successful.