Apr 27, 2022 - Blog, Franchise Articles by |

Lots of franchises fail. While some franchisees simply aren’t cut out for business ownership, more often than not, franchisees’ lack of success is due to factors beyond their control. This includes factors their franchisors can control but either: (i) choose to handle poorly; or, (ii) fail to handle effectively due to poor leadership or organization. As an Illinois franchise lawyer, this is a fact that Jeffrey M. Goldstein knows all too well.

When a franchise fails, the franchisee-franchisor relationship doesn’t just “end.” Instead, what happens is that the franchisee loses its rights via the franchisor’s termination of the franchise agreement. While most franchisors reserve broad termination rights, these rights are not unlimited, and franchisees in Illinois are entitled to certain protections under state law.

What You Need to Know if You are Facing Termination as a Franchisee in Illinois

If you are facing termination as a franchisee in Illinois, here is some important information you should know:

Illinois Law Requires “Good Cause” for Termination

Under Illinois’s franchise relationship law, franchisors must have “good cause” to terminate a franchise agreement. The law defines “good cause” as any of the following:

  • “[F]ailure . . . to comply with any lawful provisions of the franchise or other agreement and to cure such default after being given notice thereof and a reasonable opportunity to cure;”
  • Making an assignment for the benefit of creditors;
  • Voluntarily abandoning the franchised business;
  • Being convicted of a felony or “other crime which substantially impairs the goodwill associated with the franchisor’s trademark;” or,
  • Repeatedly failing to comply with lawful provisions of the franchise agreement.

Illinois Law Prohibits Discriminatory Treatment of Franchisees

In addition to requiring “good cause” for termination, Illinois’s franchise relationship law also prohibits franchisors from terminating franchisees on a discriminatory basis. If a franchisor terminates an Illinois franchisee because the franchisee failed to comply with a discriminatory obligation or restriction, the termination is wrongful even if the grounds would otherwise qualify as “good cause.”

Wrongful Franchise Terminations are Common

Despite the protections afforded under Illinois’s franchise relationship law, wrongful terminations are common. Whether a franchisor is oblivious to the protections afforded to franchisees under Illinois law or knowingly violates a franchisee’s contractual or statutory rights, a wrongfully terminated franchisee is entitled to the same remedies.  

Illinois Franchisees Can (and Should) Take Legal Action to Prevent or Remedy Wrongful Termination

When facing a wrongful termination, a proactive approach will often prove best. Particularly if a franchisor is unaware of the protections Illinois law affords, it may be possible to avoid termination by engaging in a dialogue through legal counsel. But, if you have already lost your franchise, it isn’t too late to take legal action, and holding your franchisor accountable could be essential for preserving your future opportunities.

Are You Facing Termination? Talk to Illinois Franchise Lawyer Jeffrey M. Goldstein for Free

If you need to know more about your legal rights as a current or former franchisee in Illinois, we encourage you to contact us promptly for a free initial consultation. To discuss your situation with Illinois franchise lawyer Jeffrey M. Goldstein in confidence, call 202-293-3947 or tell us how we can help online now.

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