How To Deal With Wrongful Termination Of Franchise Agreement

The franchise business has continued to thrive. However, despite this fact, there continue to be a tug of war in terms of the franchise relationships.

One area of concern is the termination of the franchise agreement.

Many cases show that franchisees are often unprepared when it comes to existing or terminating a franchise business.

Wrongful termination is when a franchise agreement is ended before it expires out due to breach of contract. The act is conducted in bad faith, hence violating the law.

The purpose of this article is to understand what brings about wrongful termination in a franchise agreement and how to deal with it legally.

Wrongful Termination 

The engagement between the franchisor and the franchisee is always stipulated in the franchise agreement. Such agreement dictates what is to be done in case of ending the relationship. Therefore, a franchisee is obligated to ensure they understand all the details concerning such a relationship.

If such a relationship is not fruitful, the franchisor or the franchisee can terminate such an agreement. If you got in a franchise agreement,  you must have come across the termination clause spelling out all terms of ending the contract.

There are many reasons why a franchisee can terminate a franchise relationship. They include:

• Franchisors bankruptcy.

• Failure to get proper training and support laid out in the agreement by the franchisor.

• Failure to get protection for their business territories by the franchisor.

If the franchisor abandons what is stipulated in the agreement, this calls for legal consequences that may deem fit for the franchisee to end the relationship.

If a franchisor wants to terminate the agreement, usually, they seed emails or letters detailing the violation of the franchise agreement by the franchisee. Other claims could be that a franchisee has been reluctant to make up or cure defaults. And once the franchisor has all reasons, regardless of whether they are authentic or not, a formal notice of termination is sent to the franchisee.

If a franchisor decides to terminate a franchisee wrongfully, this is considered a breach of contract. However, to recover damages, a franchisee has to prove that.

There was a material breach of contract. The breach occurs when one party fails to comply with what is provided in the agreement, which later deprives one party of the benefits of the contract.

If you have been wrongfully terminated, you can consult an attorney for franchise dispute to guide you on the best legal strategy.

What To Do After Wrongful Terminations

Any wrongful termination calls for arbitration or lawsuit. However, the nature of the breach will determine what best action to take. For instance, if a franchise agreement requires that notices be made by emails, sending otherwise would amount to a material breach of contract that may not warrant a lawsuit.  

However, issues such as failure to pay fees or lack of training would amount to misconduct which could hugely cost the franchisee.

In other words, the kind of legal action to take will be determined by the nature of the breach.

As a franchisee, you also want to ensure that the agreement contains specific notifications for fixing the default before any party takes legal action. Depending on the nature of the breach, the following steps may apply:

• Negotiation of a settlement: This can be done through mediation or arbitration. In most cases, parties to a business avoid legal actions and prefer solving their disputes away from the public. This can save both time and money.

• Lawsuit: Taking the matter to court is one best course of action for egregious conduct of breach of contract. However, the court may advise the parties first to attempt to agree to by engaging in alternative dispute resolutions. If the situation remains unchanged, the parties can bring a civil lawsuit

Before taking any action, you can consider consulting a lawyer to protect your interest both legally and financially. A lawyer can guide you on the franchise law remedies. 

Unfortunately, in the face of wrongful termination, many franchisees take long before consulting. Actions taken by attorneys are incredibly crucial in ensuring you don’t lose.

Remember that the court cannot undo any agreement in the contract, regardless of whether your termination was illegal or not.

After the wrongful termination, you as the franchisee must stop using the franchisor’s trademarks, names, etc. Besides, you should also return all manuals and pay any outstanding amount.

Getting Help From A Franchise Attorney

Most of the franchise agreements are quite complex. That’s why it’s advisable to have a franchise attorney guide you before signing.

These agreements prevent termination, not unless it’s done in good faith. That is the termination only happens after the expiration. The best way to handle a wrongful termination would be to look for a franchise lawyer.

The fact is that in every business deal, both parties have concerns about the issue of termination.

Termination is healthy for businesses. But when it’s done wrongly, it breeds disloyalty and can potentially destroy a business or even one’s individual financial resources.