To find out what happens when the franchise relationship is over, we turned to Charles Internicola, Managing Partner and Founder of the law firm Internicola, for more details. Internicola Law Firm works with clients and accompanies them at every stage of the business development cycle, including franchise expansion. Charles acts as an external and general consultant to a number of franchised, manufacturing and service businesses across the country. Do you want to understand how much money franchises make? Our basic guide covers this and more! Download for free below. Another critical issue that arises when a franchise relationship is terminated is determining which party (or parties) are on the franchised point of sale`s customer list. Even in the presence of a non-compete obligation, the list of customers is a valuable asset for the former franchisee. Non-solicitation provisions typically provide for solicitations for non-competitive businesses, so a former franchisee`s access to their former customer list can help launch a post-franchise. Of course, the franchisor also has an interest in keeping control of the customer list, especially if they plan to take over the location or find a replacement franchisee. Pay attention to how you make your decision about what to do at the end of your franchise. In addition to paying a renewal fee, your franchisor usually wants you to bring your business up to current standards.

This may require you to make a significant additional investment. Don`t assume that you rely most on your entire investment when you upgrade the franchise. Work with your accountant and other consultants to make this type of decision. (b) The franchisee must not have breached the contract during the term. If you have a dispute about a proposed termination of a franchise agreement, you can use the Code`s dispute resolution procedure. To the extent permitted (as some states do not apply them), separations of competition are important for the former franchisee and franchisor after the end of the franchise relationship. In the absence of a non-compete obligation, the former franchisee`s re-brand change becomes absolutely essential for the franchisor, and the obligation of “immediate” compliance is likely to be strictly enforced. If a non-compete obligation is in place, the franchisee must plan from the outset what their next step will be after the end of the franchise relationship. Franchisees have no legal right to renew or renew their franchise agreements. The ability to renew your franchise property depends on what you have agreed with the franchisor.

Take a look at your franchise agreement. Is there an extension clause? If so, it`s a good place to start. However, this does not guarantee 100% that you can renew the agreement. The maximum penalty is 300 units or $63,000 (as of June 2020). Article 18 of the Code requires a franchisor to notify its intention to renew the franchise agreement or to enter into a new one at least 6 months before the end of the period (or 1 month if the duration of the contract is 6 months or less). A franchise agreement allows business owners to operate nationally recognized brands for retailers, restaurants and other types of businesses. These agreements can cover a number of different aspects of the business, from how franchisees can market to what happens at the end of the agreement. It`s important to understand what happens if your contract with a franchise is terminated, either because the period has expired or because of a problem with the parent company. Regardless of the type of franchise, once the franchise agreement is terminated and the franchisee leaves, the franchisee is subject to non-compete agreements after termination that prevent the franchisee from starting a competing business. .