If your experience as a franchisee has not gone as you hoped, you may be facing the prospect of termination. When it comes to protecting your rights as a franchisee, taking legal action prior to termination can help ensure that you have as many options as possible. So, how do you know if your franchisor is planning to terminate? While not necessarily determinative, here are five common signs that a termination notice may soon be arriving at your franchise’s door:
1. You Cannot Get in Touch with the Franchisor.
If the franchisor’s representatives have suddenly become unresponsive, this may be a bad sign. When franchisors are planning to terminate a franchise, they will often (quickly) devote their resources elsewhere, and they may even have concerns about communicating in the face of potential litigation.
2. You are Being Treated Differently Than Other Franchisees.
Along with lack of communication, other forms of disparate treatment can be potential warning signs of impending termination as well. For example, if other franchisees are rolling out new promotional materials, or if they are being asked to adopt updated system standards, being left out could be a sign that the franchisor is not planning to keep you in the system long-term.
3. You are Struggling with the Renewal Process
While the renewal process can be a challenge even under the best of circumstances, if you are struggling to renew your franchise, there may be a reason why. The franchisor may want you out of the system, and it may be using your lack of clear renewal rights as a means to push you toward termination.
4. You are in Default Under Your Franchise Agreement.
As a general rule, franchisors reserve broad rights to terminate franchisees who are in breach of their franchise agreements. While you may or may not have “cure” rights (i.e. the right to catch up on past-due royalty payments within 30 days of receiving a notice of default), being in default is one of the surest ways to get on a franchisor’s short list for termination. Committing multiple “curable” breaches within a certain timeframe (commonly 12 months) can lead to an incurable default as well.
5. Your Franchisor Has Already Taken Action Short of Termination.
In many cases, franchisors will not only reserve termination rights, but they will reserve the right to exercise other “remedies” short of termination as well. These can include late fees and interest on past-due payments, or possibly even lifting of territorial protections. Obviously, these types of penalties can make it even more difficult for franchisees to succeed, and in many cases they will be precursors to default-based termination.
Concerned about Franchise Termination? Contact Franchise Litigation Attorney Jeffrey M. Goldstein
If you are concerned that your franchise rights may be in jeopardy, it is important that you speak with an experienced franchise attorney. At the Goldstein Law Firm, we offer free initial consultations, and we bring over 30 years’ experience to representing franchisees in termination-related disputes with their franchisors. To speak with attorney Jeffrey M. Goldstein in confidence, please call (202) 293-3947 or contact us online today.