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Question:
CAN THE FRANCHISE AGREEMENT BE TERMINATED OR NOT RENEWED?
Answer:
This generally will depend on what the franchise agreement you signed says, whether or not you have complied with it, and whether the franchiser did all that it had promised to do in the agreement.
At the outset, franchisers generally have the right to choose the parties they wish to do business with and may use their own judgment in entering into a new franchise relationship. After the period covered in the franchise agreement, and subject to your rights to renew, you will be in a negotiating session with the franchiser over extending the franchise.
If you have failed to comply with the agreement, you can expect that the franchiser will not be pleased about the prospect of having you continue with the arrangement. In fact, even before the original term is over, the franchiser may seek to terminate your franchise ? as a McDonald's franchisee who starts selling Sushi would soon find out.
Depending upon the appropriate state law, a franchiser may have the right to terminate a franchise or to refuse to renew a franchise for "good cause" ? such as failure to meet sales quotas or lack of quality standards. Many contracts are drafted in such a manner that it is probable that a franchisee would breach it at sometime allowing the franchiser to cancel the contract or not renew it. Some state statutes require specific conditions, such as failure to meet monetary obligations, correct defects, or quality standards, for termination or for non-renewal. Other states also require special notices within certain time periods be provided to the franchisee before termination or non-renewal.
Date: 2004/6/7
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