As a franchisee, you are subject to a host of obligations. Many of these obligations are also subject to strict deadlines, and franchisees can face significant consequences (including possible termination) if they fail to meet their obligations within the timelines their franchisors prescribe.
While all franchise agreements are unique (and franchisees should seek legal advice tailored to the unique provisions of their signed contracts), the following are six common deadlines that apply to franchisees:
1. Commence Operations
Franchise agreements will commonly include provisions that require franchisees to commence operations within a specified period of time. Take too long to get up and running, and you may find that your franchise rights are already in jeopardy. While these provisions are theoretically designed to protect franchisors in the event that a franchisee locks in an exclusive territory and then decides to delay opening for business, they are ripe for abuse – especially if a more-attractive franchise candidate comes along.
2. Pay Royalties and Marketing Fund Fees
Royalty and marketing fund fees are due monthly in most cases, and many franchisors require their franchisees to establish connectively for automated electronic payments. But, if you are actively submitting payment each month, or if your cash flow is such that your account balance may be too low when your fees are due, you need to make sure you know when you need to pay in order to avoid default (and possible termination).
3. Provide Notice of Intent to Renew
Franchise renewal provisions can be inordinately complex, and franchisors will often impose extremely-limited windows within which franchisees must provide notice of their intent to renew. While a certain amount of advance notice is common (i.e. “Franchisee must provide notice of its intent to renew at least six months prior to expiration”), some franchisors will place front-end restrictions on renewal notices as well (i.e. “Franchisee must provide notice of its intent to renew between nine and three months prior to expiration”).
4. Provide Notice of Intent to Transfer
If you intend to transfer your franchise rights, you almost certainly need to seek your franchisor’s approval, and you probably need to provide a minimum of one or two months’ advance notice before the transfer is scheduled to close.
5. Cure Defaults
With respect to certain types of defaults (such as non-payment of royalty fees), it is common for franchisees to have a limited period within which they can “cure” the default and avoid termination. If your franchisor has issued a notice of termination, it is critical to make sure you know how long you have to remedy the default.
6. Initiate a Claim Against Your Franchisor
Finally, while civil claims are subject to “statutes of limitations” under state law, franchise agreements will commonly impose much shorter limitations periods for claims against the franchisor. If you are considering initiating a dispute resolution procedure (i.e. mediation, arbitration or litigation), you should carefully review the relevant provisions of your franchise agreement to ensure that you know what you need to do to protect your rights.
Contact a Franchise Litigation Attorney at the Goldstein Law Firm
If you are facing termination or another issue involving a deadline in your franchise agreement, we encourage you to contact us to discuss your rights. To schedule an appointment with attorney Jeffrey M. Goldstein, please call (202) 293-3947 or submit your information online today.
