Franchise Advice


From start to fi nish O


Jane Masih highlights the importance of knowing what to expect when the franchise agreement ends


ne of the questions I am often asked by franchisees is what will happen when the franchise agreement comes to an end? The answer, as with


so many other questions concerning the franchisor/franchisee relationship, lies in the franchise agreement itself. It is standard practice for the franchisor to grant you a licence to use their system for an initial term, meaning the period of time in which you will have a licence to run the business as a franchisee. The length of this term will vary depending on the level of investment required to operate the franchise. For many franchise agreements, the typical length of the initial term is


around fi ve years, but it can be as much as 10 or 20, depending on the franchisor’s business model.


Franchisees do not always appreciate when they commit to a franchise that, if the franchise agreement is not renewed, their right to run their business will end when the initial term expires. Once the term ends, the provisions in the agreement relating to termination or expiry will apply. When considering whether or not to enter into a franchise, it is sensible to take note of the fact that, at the end of the term, you are highly unlikely to be able to simply carry on trading in competition with the franchise network you have just left.


If you wish to continue with the franchise 44 | BusinessFranchise.com | September 2017


business you will need to plan ahead and check the provisions of the franchise agreement well in advance of the end of the term. If you have a right or an option to renew, you will need to ensure that you fulfi l the conditions to enable you to exercise this option. It is common for the franchisor to include conditions such as: • Requiring the franchisee to give


written notice of their wish to renew in accordance with the notice periods set out in the agreement, usually no more than six months nor less than three months before the end of the term


• The franchisee must not be in breach of the terms of the agreement at the time notice is served or at the time of renewal


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