How to Legally Terminate a Franchise Agreement

Legally terminating a franchise can be sticky business for the average business person, and often requires the assistance of an attorney with expertise in franchise law. The ease of termination will depend on the terms laid out in your initial Franchise Agreement.

Things You'll Need

• Franchise Disclosure Documents
• Computer with Internet access

Instructions

1. Determine whether either party has violated any portion of the original Franchise Agreement. If either side knowingly or intentionally breaches the Franchise Agreement or has misrepresented themselves in any way on this document or the Franchise Disclosure documents, the Franchise Agreement may be rendered legally null and void.

2. Note that your franchisor often reserves the right to legally quit the Franchise Agreement immediately if you opt to quit paying employees, close your doors for days on end, compete with the franchise brand with another business, violate health and safety codes continually for 30 or more days or maintain a policy of non-compliance with quality requirements. However, this often leaves the former franchisee liable for any costs resulting from the termination along with any fees stipulated in the contract.

3. Read and follow the instructions for termination of your franchise agreement in the language of the document to the letter. All Franchise Agreements must outline the proper steps for either party to terminate the agreement.

4. Know that some franchisors write in no-kill clauses to Franchise Agreements to the detriment of inexperienced franchisees wanting out at a later date. Protect yourself from this trap by enlisting the help of a franchise attorney if you are bound by such a document.

5. Notify the counter-signing party of your intention to quit the Franchise Agreement in writing 6 months prior to the intended date of severance. Oftentimes, you will be released without delay by issuing proper notification.

6. Follow protocol for sale or transfer of the franchise to a third party, passing your contractual obligations in whole to them. Beware the Franchise Agreement forbidding transfer, as you may forfeit your right to compensation by initiating sale and transfer in violation of your contract.

7. Declare bankruptcy. A franchisor usually reserves the right to legally terminate your Franchise Agreement in the event of bankruptcy or other creditor issues.

8. Turn to the American Franchisee Association for more information on legally terminating a Franchise Agreement, along with other useful tips for franchisees (see Resources below).

Tips & Warnings

• Know your Franchise Agreement intimately, watching for any violations of the contract by its co-signatory that could allow you grounds for legal nullification of the agreement.

• The process of legally terminating a franchise agreement may take several weeks or even months, allowing for back-and-forth between you, the franchisor and your lawyers.

• You can find a franchise attorney through FranchisingLaw.com (see Resources below).

• Failure to notify the other party when a breach of the Franchise Agreement has occurred may result in forfeiture of your rights to nullify the Agreement without a legal battle.