Many franchisees presume that, once they open their store, they will have the right to continue to run that store in the future. However, franchise law is largely based on the terms of the franchise agreement, which is a binding contract. These franchise agreements almost always include the term, or length, of the agreement. When the term ends, franchisees have to go through the renewal process. Even when the franchise agreement gives the franchisee the right to renew, it is often encumbered with conditions and obligations to cure alleged problems.
Having the legal representation of a franchise attorney to prepare you for this process and to guide you through it can make a huge difference in the continued viability of your franchise. The attorneys at the Katz Law Group can help you in Massachusetts.
Franchisors Use the Renewal Process to Gain Concessions
An important adage in franchise law is that franchisors get you coming and going. When your franchise agreement is about to expire, franchisors use the opportunity to require that you sign a “then-current” agreement. This new deal generally has harsher terms across the board, like higher marketing fees and worse royalty rates.
A Common Demand is to Cure Alleged Violations
Franchisors also use the renewal process as an opportunity to point out alleged flaws in the operation of your franchise that brings it outside franchise standards or that violate the franchise agreement. In some cases, these are trivialities, like a sign that uses the chain's old logo. In other cases, it can require a substantial remodel to your premises.
Many franchise agreements allow the franchisor to refuse to renew the agreement if there is a “material” problem. What amounts to a “material” issue – or even if the issue actually violates the terms of the franchise agreement – is not always clear.
Unfortunately, it is not uncommon for franchisors to abuse this process in order to end their agreement with a franchisee that they feel has been underperforming, or that they feel has been too outspoken about their rights. Franchisors may even demand unreasonable cures from franchisees in order to make way for a better opportunity for the franchisor, even though it comes at the franchisee's expense.
Franchisees Need to Satisfy the Obligation to Cure Alleged Defects
In order to renew the agreement and keep your franchise, though, you need to cure the defects or show that the alleged defects are not actually violating the agreement. Franchisors who have an ulterior motive and who want to terminate the agreement, however, will often continue to argue that your cure is not up to standard or will find other reasons to fight against a renewal.
The Franchise Lawyers at the Katz Law Group
Throughout this process, having effective legal representation is key. When you are first starting your franchise and are negotiating the franchise agreement, a lawyer can point out difficulties you are likely to have during the renewal process and tell you what you need to know about your obligation to cure alleged violations.
During the renewal, a franchise attorney can advocate on your behalf, invoke your contractual rights under the franchise agreement, and show that the alleged violations are not actually against the contract, or that your cures satisfy the requirements and triggers your right to renew the agreement.
The franchise lawyers at the Katz Law Group have decades of experience in helping Massachusetts franchisees succeed. Call them at (508) 480-8202 or contact them online.
