What Happens When Your Franchise Agreement Expires

Jeff Fabian owns Fabian, LLC, an intellectual property law firm and a business firm that serves franchisors and franchisees. Contact the company directly at 410.908.0883 or jeff@fabianlegal.com. You can also follow Jeff on Twitter @jsfabian. (f) The franchisee executes the franchisor`s franchise agreement in effect at the time and other documents that the franchisor usually uses for its franchisees. The franchise agreement then in force may have different terms than those contained in this agreement, provided that such an agreement does not require the franchisee to pay another initial deductible and, unless it requires the franchisee to substantially change the way the franchisee manages the transactions. The franchisor must also pay the franchisor the annual fee in addition to all document production costs, franchisor consultation and any continuing education costs. Ensure that the duration of the agreement and the extension periods are sufficient to allow a franchisee to obtain a reasonable return on their investment. Normally, the larger the investment, the longer it takes to recover the investment. Therefore, an agreement on a retail business with very large equipment of the premises may require a period of ten years with several renewal fees of 10 years each. Whether you`re an active franchisee, a successful franchisor or someone looking for franchise opportunities, something that definitely employs you is what happens at the end of the franchise agreement (note: if you don`t, you should be). Examine four of the biggest fundamental concerns arising from the termination of a franchise relationship. As a general rule, a franchise agreement with an average term of five years should be renewed twice. With a 10-year medium-term contract, there would generally be an extension and, for much longer periods of 20 to 25 years, only an extension would be likely.

If you decide to renew, one of the first things you need to make sure it`s not already too late to do so. Under the many conditions of the extension, most franchise agreements require that the franchisee (by a specific delivery method and specific address) be informed at least a minimum number of days before the expiry date. Some franchise agreements even have special extension windows (z.B. you have to make a notification between 120 and 60 days before the end of time.) – Well, things change over time, and the business you buy today may not be the business you do in 10 years. Laws change, technology evolves, etc. At the end of the franchise agreement, both parties assure that their mutual agreement and expectations are appropriate given the state of affairs at the time.