Most franchise agreements last two or three years before they expire. This is not a long time. In fact, for many franchisees, it is nowhere near enough time to build a business that allows them to recoup their initial investment—much less turn a profit. As a result, renewals can be essential, and franchisees whose agreements are up for renewal must ensure they make informed decisions focused on the future. Learn more from national franchise attorney Jeffrey M. Goldstein.
What You Need to Know if Your Franchise is Up for Renewal
If your franchise is up for renewal, there are several key considerations you need to keep in mind as your franchise agreement’s expiration date approaches. Here are seven examples:
1. The Renewal Process Can Take Time
The first thing you need to know is that the renewal process can take time. Renewing your franchise isn’t simply a matter of letting your franchisor know that you plan to stay in the system. Instead, you must take all the steps necessary to meet the renewal conditions in your current franchise agreement, and be prepared to work with your franchisor to confirm that you will be able to continue operating at the end of your current term.
2. You May Be Required to Provide Advance Notice of Your Intent to Renew
Most franchise agreements include provisions that require franchisees to provide advance notice of their intent to renew. Some of these simply require a certain amount of advance notice (i.e., notifying your franchisor at least 60 days before the current term expires), while others establish narrow windows (i.e., notifying your franchisor between 60 and 90 days before the current term expires).
While this might seem like a technicality, franchisors can—and do—hold franchisees to these timing requirements. To avoid unnecessary issues, you will want to notify your franchisor of your intent to renew at the appropriate time.
3. Your Franchisor May Have Significant Control Over Your Ability to Renew
In addition to requiring advance notice, franchise agreements typically include several other renewal conditions. Some common examples include:
- Being current on royalties and marketing fund contributions;
- Being up-to-date on the franchisor’s current system standards; and,
- Being in compliance with all other terms of the franchise agreement.
As a result, your franchisor may have significant control over your ability to renew. If you are not in full compliance with your franchise agreement (or if you arguably are not), your franchisor could use this as leverage to either require you to make significant additional investments or to try to force you out of the franchise system.
4. You May Be Required to Sign Your Franchisor’s “Then Current” Franchise Agreement
Another common renewal condition is a requirement to sign the franchisor’s “then current” franchise agreement. While this agreement is likely to be similar to your current franchise agreement overall, it could have material differences. Franchisors regularly update their franchise agreements to reflect changes in their systems, to take advantage of changes in the law, and to take advantage of their additional leverage as they grow and expand.
This means that as you go through the renewal process, you will need to have your franchisor’s “then current” franchise agreement reviewed by a franchise attorney. An experienced franchise attorney can highlight any new concerns and help you decide whether you are willing to take on any additional risks posed by the new franchise agreement.
5. You May (or May Not) Have More Leverage to Negotiate Than You Did Previously
Now that you are an established franchisee, you may have more leverage to negotiate the terms of your franchise agreement than you did previously. If your franchise is profitable (at least for your franchisor), it may have a vested interest in keeping you around.
Conversely, if your franchise isn’t doing well, your franchisor could be interested in granting your location and territory to someone else. In this scenario, you could have even less leverage than you did as a prospective franchisee, and this could impact your franchise agreement negotiations if you are otherwise entitled to renew.
6. If You Don’t Renew, You Will Likely Be Subject to Several Post-Termination Restrictions
Let’s say you opt not to renew. What happens then? If you don’t renew your franchise, you will be required to stop operating immediately at the expiration of your current term. You will also become subject to your franchise agreement’s post-termination restrictions. Common post-termination restrictions include:
- Refraining from making any use of the franchisor’s system concepts or brand;
- Not operating a competing business for a specified number of years; and,
- Not contacting your franchise’s clients or customers.
These types of post-termination restrictions are generally enforceable in the franchise context, and noncompliance can expose former franchisees to significant liability. As a result, if you don’t renew, it will be important to make sure you know what you aren’t allowed to do as you chart your next steps.
7. An Experienced Franchise Attorney Can Help You Make Informed Decisions
From providing timely notice to negotiating the terms of your new franchise agreement, an experienced franchise attorney can help you make informed decisions throughout the renewal process. Given the financial and legal implications, it is important not to handle this process on your own. If your franchise is up for renewal in 2026, we invite you to contact us for more information.
Schedule a Call with National Franchise Attorney Jeffrey M. Goldstein
Is your franchise up for renewal? If so, we can help you make informed, confident decisions and communicate with your franchisor (or its legal team) on your behalf if necessary. To schedule a call with national franchise attorney Jeffrey M. Goldstein, give us a call at 202-293-3947 or request a free initial consultation online today.
