David M. Duree and Associates, P.C.
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The consequences of terminating a franchise agreement

On Behalf of | Mar 17, 2020 | Uncategorized

The benefits of buying into a franchise are numerous. You are a small business owner in Illinois with the support of a corporation behind you. Your chances of success are higher because you are working with a proven brand with well-established practices for success. The franchise you choose may offer you all the training you need, and you will likely have support and marketing help along the way.

Of course, even something as tried and true as a franchise can have its disadvantages, and one of them is the rigid contract you may have to sign. The agreement you make with the franchisor often leaves little room for your own creativity and places strict quotas on your production. Once you sign the franchise agreement, you may also have a difficult time getting out of it. It is important that you understand the ramifications of breaking your agreement and where you can turn for legal assistance.

Considering many factors

The franchise agreement you sign may have a termination date, after which the franchisor may decide not to renew your contract. Your agreement should spell out what happens in this case and whether you will be financially responsible in any way for the termination of the contract. If you do not understand the language of these terms of the agreement, it is not wise to sign it and hope for the best. Instead, seek advice from an attorney with experience in franchise law.

If the agreement has not reached its termination date but you want out of it or your actions constitute a breach of the contract, there may be serious consequences to consider, including the following possibilities:

  • The franchisor may sue you for breach of contract.
  • The company may charge you a penalty for terminating the agreement early.
  • You may lose the investment you made into the franchise.
  • The franchisor may require you to pay the balance on your agreement.

You have the right to consult an attorney before signing any contract, especially one that places so much of your money and time at risk. You may even have the leverage to negotiate for better terms if you feel the agreement does not benefit you. However, if you have signed an agreement and end up in a dispute with your franchisor, it is a good idea to seek the advocacy of an attorney who will fight for your best interests.