When considering any business venture, you need to plan for all eventualities. Once you’ve got the business up and running, you may find you’re not happy so you might want to sell up and move on. Alternatively, if your circumstances change, you may need to terminate the franchise agreement before the end of the term. Either way, you will need to understand all of the termination related clauses in the franchise agreement (another important reason to get legal advice before signing the franchise agreement).
The franchise agreement should set out:
- when you can terminate the franchise agreement
- how to terminate the franchise agreement
- the termination notice period
- any restrictions on terminating the franchise agreement before the end of the contract term
- the fees/penalties for early termination
- how you can dispose of your business
- who owns the client database you have built
- what restrictions are placed on you (competing with the franchisor’s business, dealing with suppliers and customers, dealing with staff) when the franchise comes to an end and how long those restrictions will be in place
If you signed a lease for the premises, leases for any equipment, and/or any fixed term supply agreements while operating your franchise business, you will also need to understand the termination related clauses in those documents.
If you do your homework and get professional advice, buying into a franchise can be a great decision. Once you’re signed up, if you hit a speed bump or you’re concerned about any aspect of your business, business advisors and turn around experts are there to help. All you have to do is ask.