It’s 2022, and this was supposed to be the year that things got back to normal. But, the omicron variant is once again causing COVID cases to spike across the country, and many businesses are struggling as a result. If your franchise is struggling due to the economic impacts of the pandemic, what are your options? What are your legal rights? Franchisee attorney Jeffrey M. Goldstein explains.
You Need to Review Your Franchise Agreement
If you are having trouble paying your royalties and meeting payroll because of the spread of the omicron variant, your first step should be to review your franchise agreement. There are a few provisions you will want to examine in particular:
- Term – When does the current term of your franchise expire? If you are nearing the end of the current term and you can weather the storm, then waiting until you can walk away could be your best option.
- Termination – While most franchise agreements do not provide franchisees with termination rights, there are some exceptions. Do you have the right to terminate your franchise? If so, under what circumstances?
- Force Majeure – Does your franchise agreement’s force majeure clause apply? These clauses excuse non-performance (i.e. failure to timely pay royalties) in certain unforeseen circumstances, and it is possible that the pandemic could be covered.
There are some other important provisions as well. For example, if you haven’t been paying your royalties (or if you are at risk for not being able to pay your royalties going forward), this could provide your franchisor with a right of termination. So, you will want to make sure you know your franchisor’s termination rights. You will want to carefully review the post-termination provisions of your franchise agreement as well—as you could remain on the hook for “lost future royalties” even after you exit the system.
Can a Franchisee Attorney Help?
Depending on your circumstances, there are various ways a franchisee attorney may be able to help you. Minimally, a franchisee attorney can help you understand how the relevant provisions of your franchise agreement apply. But, an attorney may also be able to help you by:
- Figuring out what other franchisees in the system are doing to protect themselves
- Negotiating concessions with your franchisor (i.e. a grace period for paying royalties during the pandemic)
- Determining if you have grounds to pursue a claim against your franchisor or negotiate a pre-expiration exit from the franchise system
- Helping you explore financing opportunities
- Leveraging the force majeure clause in your franchise agreement or other applicable provisions of the agreement to help you avoid termination
Discuss Your Options with Franchisee Attorney Jeffrey M. Goldstein
If your franchise is struggling due to the economic impacts of the omicron variant, we encourage you to contact us for more information. Franchisee attorney Jeffrey M. Goldstein has more than 30 years of experience, and he can help you make informed decisions. To get started with a free initial consultation, please call 202-293-3947 or inquire online today.
