Opting for a franchise instead of starting your own brand from scratch provides several advantages. For one, the franchise’s established name means you might not have to spend too much money and effort on introducing and marketing the brand.
However, franchising also means decisions regarding your business’s future are not yours alone. For instance, if the franchisor decides to terminate your franchise out of the blue, you could lose your business.
To protect yourself from events like this, it helps to understand signs that your franchisor wrongfully terminated the franchise. Here are some of them:
Franchisor terminated on grounds not in the franchise agreement
The franchise agreement contains grounds for legally terminating the franchise. These may include being unable to pay the necessary fees or engaging in activities that might compromise the brand. After the franchisor terminates your franchise, it helps to compare the reason they cited to the grounds stated in the agreement.
Franchisor, in bad faith, refused to renew the franchise
Like contracts, franchise agreements typically carry an implied duty of good faith and fair dealing. Also known simply as “good faith,” this duty generally requires all parties to be honest and cooperate to ensure that the agreement will accomplish its intended purpose. This doctrine might apply if your franchisor terminates the agreement for reasons they refuse to specify or involving unfair circumstances.
Franchise law can be quite challenging, but a firm understanding of it is necessary to protect your rights and your business. A franchise law attorney can assist you in navigating the law’s complexity and help in confirming whether your franchisor’s actions go against the rules or are acts of bad faith.
