When acting for franchisors, I frequently find myself giving the advice to tread carefully when terminating a franchise agreement. Where there is a significant amount of value in the franchisee’s business, no franchisee is going to stand back and allow the termination to proceed without a fight. If there is any element of dispute around the process for termination or the grounds of termination, including any element of lack of good faith, then there is a good starting point for the Court to step in to prevent termination by injuncting the franchisor from doing so.
When issuing one-month termination notices in circumstances where it is likely, there are going to be challenged to the grounds of termination. A franchisee in a substantial business of this type is only ever going to react by lawyering up and seeking an interim injunction. It is unclear whether dispute resolution had been previously entered into between the parties, and this would have been the better course. That would have avoided the negative publicity that now permanently attaches to the franchisor’s brand and would have further avoided the franchisor now being in a situation where the franchisee is in a very strong negotiating position. Too often, I see franchisors in similar situations taking overly aggressive positions with franchisees, usually compounded by legal input, when there is an easier pathway through dispute resolution to moving franchisees along who have become unpalatable in the system.
At Doon Law, we help you to provide step by step guidance to terminate the Franchise Agreement successfully.