If you are faced with the loss of you franchise business due to breach or default, then you should contact an attorney immediately to learn about your rights and remedies. The purpose of this article is to explain and convey the importance of breach or default of your franchise agreement. The consequences of breach can be significant.
A franchise agreement is a contract between a franchisor and franchisee. Like all contracts, franchise agreements grant rights, establish conditions, and impose obligations.
Franchise agreements are robust documents that govern the franchisee-franchisor relationship. They impose and define the specific, obligatory standards of conduct and provisions franchisees must follow.
Franchise agreements can be strictly enforced. Franchise agreements are drafted to benefit franchisors, and its language empowers franchisors with mechanisms to enforce contractual obligations, along with preventing breach.
A franchise system must have uniformity and consistency throughout. Breach can undermine the franchise system and introduce misconduct and inconsistency, which is detrimental to the franchise. Therefore, franchisees must not deviate from their obligations under the franchise agreement.
Breach results from a franchisees failure to adhere to the obligatory terms. Breach can lead to undesired outcomes, including default. Default means not compliant, and it is premised upon being in breach of one or more obligations. Breach leads to default, and default must be remedied, if able.
Franchise agreements generally categorize breach and default based upon the availability of a cure period. There are generally two, broad categories: curable and incurable. The determination is based upon the seriousness of the franchisee’s conduct. If curable, the franchisee is afforded an opportunity to become compliant by correcting the breach, whereas incurable triggers termination, with no opportunity to cure, resulting in the loss of the franchisee’s rights and business, along with the additional litigious burden of defending against the franchisor’s claims arising from breach of the franchise agreement.
In summation, the franchise agreement is the contract that sets forth the terms for the relationship between the franchisee and the franchisor. Strict adherence is required.
Thoroughly understanding the franchise agreement is a foundational requisite to compliance because franchisees must know (awareness + understanding) the terms in order to comply therewith. Since franchise agreements favor franchisors, franchisees are inherently disadvantaged during litigation, which is an unenviable position.
As a franchise attorney, I work with franchisees at all stages, including new, ongoing, and exiting franchisees, along with franchisees faced with termination and litigation. Please give us a call today to discuss your legal matter. The initial call is confidential, and we offer it at no cost to you and with no obligations to proceed. We look forward to speaking with you about your franchise business!
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