Ending the Franchise Relationship
Ending the Franchise Relationship
It’s not easy for a franchisor to put an end to a franchise. Regardless of what the franchise agreement says, all franchisees have the right to apply for a court order preventing or delaying the franchisor from terminating the franchise or enforcing whatever security agreement the franchisor may have. In such an application to a court, the franchisee will benefit from being the “little guy” in the dispute.
In order to terminate a problem franchisee, the successful franchisor must plan carefully and execute swiftly. Here’s a franchisor’s hit list:
Know your rights
The franchise agreement must be carefully reviewed to ensure that all of the franchisee’s obligations that the franchisor considers to be important are clearly set out. The franchise agreement must also provide specific consequences for failure of the franchisee to observe these obligations; i.e., that franchisor must clearly have the right to terminate the agreement for the default in question.
Build the case
It’s important for the franchisor to “build its case” against the problem franchisee. The franchisor should not seek to terminate the agreement on the basis of “minor” breaches. Rather, notices of default should be sent out in connection with each of the breaches in question and a detailed file maintained with respect to all such matters together with particulars of the follow-up by the franchisor in each case. The franchisee should not be able to argue that the franchisor has condoned its conduct.
Follow the letter of the agreement
Third, when a major default occurs or when a number of minor defaults have accumulated, the notice of default or termination must be absolutely correct in its content. A proper accounting of any dollar amounts should be set out. All time frames for notice and the method of notice provided for under the franchise agreement should be scrupulously adhered to and, where appropriate, a “belt and suspenders” approach should be taken by providing an extra few days’ notice and by sending copies by a couple of alternate means of delivery.
Reset the clock
The franchisor should not allow the franchisee to “muddy the waters”. If deadlines or specific amounts are set out and the franchisee does not comply because an extension or modification has been agreed to, the franchisor needs to “reset the clock” clearly and with specifics of whatever additional requirements remain outstanding. Notes should be made of all conversations, and all communications carefully kept in the file.
Act promptly and firmly
Finally, when the decision is made to terminate the franchisee, the decision should be implemented swiftly and with conviction (care must be taken to ensure that all notice periods required by law are clearly observed). You may even be pleasantly surprised to find that your once problematic franchisee is now anxious to cure all outstanding defaults, once he sees that you are prepared to take termination proceedings.
Ending the Franchise Relationship - To learn more about this author, visit Peter Macrae Dillon's Website.
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Virtually every franchise system has problem franchisees. Sometimes the problem is the individual running the franchise. Sometimes the problem is a bad location. Whatever the cause, franchisors are presented with franchisees from time to time that they would like to terminate.
It’s not easy for a franchisor to put an end to a franchise. Regardless of what the franchise agreement says, all franchisees have the right to apply for a court order preventing or delaying the franchisor from terminating the franchise or enforcing whatever security agreement the franchisor may have. In such an application to a court, the franchisee will benefit from being the “little guy” in the dispute.
In order to terminate a problem franchisee, the successful franchisor must plan carefully and execute swiftly. Here’s a franchisor’s hit list:
Know your rights
The franchise agreement must be carefully reviewed to ensure that all of the franchisee’s obligations that the franchisor considers to be important are clearly set out. The franchise agreement must also provide specific consequences for failure of the franchisee to observe these obligations; i.e., that franchisor must clearly have the right to terminate the agreement for the default in question.
Build the case
It’s important for the franchisor to “build its case” against the problem franchisee. The franchisor should not seek to terminate the agreement on the basis of “minor” breaches. Rather, notices of default should be sent out in connection with each of the breaches in question and a detailed file maintained with respect to all such matters together with particulars of the follow-up by the franchisor in each case. The franchisee should not be able to argue that the franchisor has condoned its conduct.
Follow the letter of the agreement
Third, when a major default occurs or when a number of minor defaults have accumulated, the notice of default or termination must be absolutely correct in its content. A proper accounting of any dollar amounts should be set out. All time frames for notice and the method of notice provided for under the franchise agreement should be scrupulously adhered to and, where appropriate, a “belt and suspenders” approach should be taken by providing an extra few days’ notice and by sending copies by a couple of alternate means of delivery.
Reset the clock
The franchisor should not allow the franchisee to “muddy the waters”. If deadlines or specific amounts are set out and the franchisee does not comply because an extension or modification has been agreed to, the franchisor needs to “reset the clock” clearly and with specifics of whatever additional requirements remain outstanding. Notes should be made of all conversations, and all communications carefully kept in the file.
Act promptly and firmly
Finally, when the decision is made to terminate the franchisee, the decision should be implemented swiftly and with conviction (care must be taken to ensure that all notice periods required by law are clearly observed). You may even be pleasantly surprised to find that your once problematic franchisee is now anxious to cure all outstanding defaults, once he sees that you are prepared to take termination proceedings.
Ending the Franchise Relationship - To learn more about this author, visit Peter Macrae Dillon's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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