How to Get Out of a Franchise

Breaking out from a franchise contract is not easy because the majority of the decision is the hands of the franchisor.

This matter also requires a significant number of conditions to be met and actions to be achieved.

In here, we have to be aware of what the franchisor’s capabilities are. In issues especially in getting out of a franchise contract, the situation is usually in favour of the franchisor, since he directs the majority of the decisions. Franchisors are able to lessen their responsibilities and liabilities because of the different documents and agreements signed between the franchisor and the franchisee. Franchisors also have the responsibilities of listing and validate salary declarations, current and past proceedings, and the number of franchises in full operation and the number of franchises which already folded up, along with anything else material to the business. Franchisees have less freedom in setting out for an agreement, because of these.

Before you consider getting out of a franchise agreement, we must think critically if we really need to get out of the franchise. This will be seen in another form of story line if getting out of the agreement is a product of the preferences and the firm decisions of the franchisee himself or herself. We can identify the problem, then research or do some actions to see if the problem has an available solution. Say for example, if your franchise is hurt by recession, you can get an adviser first to try and help alleviate the problem. Illegal proceedings made during the negotiation process which are only discovered today can be possible grounds for the closure. Another issue will reside if the cause of getting out of the agreement is in a personal perspective.

A franchisor may commit a mistake of not meeting the legalities of the contract or has made fraudulent statements to the franchisee and has not taken actions in accordance with the agreements stipulated in the contract. In this kind of situation, the franchisee may have a strong argument. If arbitration or the negotiation for the closure of the contract is unsuccessful, the franchisee can pursue a lawsuit.

Some franchisors allow subfranchising or reselling, although the franchisor sometimes maintains the right to buy it back from the franchisee, which may garner a less than market value price. In this case, when the time comes that the franchisor uses the right to buy the purchase back, the franchisee cannot contest.

These are just to of the situations wherein we can take into account the motion for contract cancellation. The general tip here when applying for closure is that we have to see first what is going on. We have to see the things that shall contribute to the motion for the breaking up of the contract. We have to see what is going on with your business – if it still gains profit or not. Observing what is going on with your franchisor is another thing that can be observed.


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