As a franchisee, your “right” to renew is likely subject to several conditions. A typical renewal condition in franchising is an obligation to cure any outstanding violations of the franchise agreement.

You might have received a site inspection scorecard, or maybe it was an impersonal letter from your franchisor. Maybe you received advance warning, or maybe not. In any case, you thought you were on track to renew your franchise, and now your franchisor is threatening to deny you a renewal term unless you “cure” an alleged violation (or perhaps multiple alleged violations) of your franchise agreement.

Understanding Your Obligation to Cure (or Lack Thereof)

If your franchisor has preliminarily denied your request to renew citing an obligation to cure, one of your first steps should be to have a lawyer review the renewal provision in your franchise agreement. Not all “obligation to cure” provisions are alike, and it may be that the representative with whom you are in contact is misinterpreting the terms of your agreement. But, even if this is not the case, it will still be important to know the exact language in your agreement so that you can take appropriate action to protect your investment.

For example, franchise agreements will often require cure of “material” defaults as a condition of renewal. But, what is “material”? There are certain legally-recognized standards, and it may be that your technical breach of the agreement is insufficient to justify non-renewal. In some cases, there can be a question of what it means to “cure” a default as well (i.e. if you made a mistake in the past that cannot be undone). Then, of course, there are the questions of:

  • Is what the franchisor has alleged actually a violation of the agreement?
  • Have you in fact committed the alleged violation?

It is no secret that many franchisors will overexert their authority over their franchisees. If your franchisor wants you out of the system (i.e. to make room for a multi-unit developer), you may need to take aggressive action to renew your franchise.

Franchisee Protections Under State Franchise Laws

In some states, franchise relationship laws provide protections for franchisees even in the face of unfavorable contract language. For example, many states have laws that require franchisors to act in “good faith” when addressing franchisees’ requests to renew. These laws vary widely from state to state and several courts have rendered decisions that limit their effectiveness; but, if you have run into (or are anticipating) issues during the renewal process, you will want to know what additional protections, if any, you have available.

Contact National Franchise Lawyer Jeffrey M. Goldstein

For help protecting you right to renew your franchise, contact the Goldstein Law Firm. Our firm exclusively represents franchisees and dealers, and founding attorney Jeffrey M. Goldstein brings over three decades of experience to fighting for franchisees nationwide. To get started with a free and confidential consultation, call our offices at (202) 293-3947 or inquire online today.

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Goldstein Law Firm, PLLC

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Phone: 202-293-3947
Fax: 202-315-2514

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