Franchises are great ways for entrepreneurs to own a business without having to start from scratch. The products and services they offer already have name recognition and an established organizational network. Franchising management teams work hard to make sure their owners have upstanding reputations and good work ethics before accepting them into the organization. Things can go wrong however, and a franchise termination Illinois owners try to avoid is the result.
Good cause is a blanket term that is often used when a franchisor decides to terminate a franchisee. Failure to adhere to the contractual agreement between the two parties is the specific meaning. Franchisors have teams of lawyers whose job it is to see that the contract contains language outlining what constitutes good cause terminations. One of them is damage to the franchise's reputation. Fraud or other felony charges brought against an owner is a good example.
Selling competing or fraudulent products under the trademarked name is another reason to terminate a relationship with a franchisee. In some states, proving they are doing this is not enough. In these states it is incumbent upon you, as the franchisor, to include this violation in the contract signed by both you and franchisee. If you don't the courts may not be swayed in your favor.
Failure to maintain standards is another good cause that can get franchisees terminated. There have been cases when businesses have been cited for lack of cleanliness, quality, and service. There are other instances in which franchisees have failed to operate their businesses in a responsible fashion. Termination was permitted in the case of a franchisee who failed to renew a building lease agreement, costing the franchise additional rental charges.
Sales are at the core of most businesses. Franchise management have goals they expect their owners to meet. Failure to meet those goals, if they are reasonable, can constitute a breach of the contract. Franchises have to be profitable to remain viable. In cases where franchises have become insolvent, or a franchisee neglects to sell the product or service in a section of its territory, the franchises have been terminated.
Following procedures is important if a franchise truly intends to terminate a franchisee. The exact procedural process varies from state to state. Franchisors are required to notify a franchisee about the termination in advance. Notifications must include a line item listing of the franchisor's objections and the exact date of the cessation. In cases where a breach is curable, the franchisor must give the franchisee a time frame to correct the objections.
A franchisor must give a franchisee enough time to attempt to cure the breach unless it is determined that the breach is incurable. The time frame allotted must be sufficient for the franchisor to correct the problems. If a court decides the franchisee was not given sufficient time, it can prohibit the termination.
Franchises can be great opportunities for those interested in opening a business with an established reputation. It comes with responsibility though. Franchises are not independent operations. They come with obligations and restrictions that, once agreed to, must be upheld.
Good cause is a blanket term that is often used when a franchisor decides to terminate a franchisee. Failure to adhere to the contractual agreement between the two parties is the specific meaning. Franchisors have teams of lawyers whose job it is to see that the contract contains language outlining what constitutes good cause terminations. One of them is damage to the franchise's reputation. Fraud or other felony charges brought against an owner is a good example.
Selling competing or fraudulent products under the trademarked name is another reason to terminate a relationship with a franchisee. In some states, proving they are doing this is not enough. In these states it is incumbent upon you, as the franchisor, to include this violation in the contract signed by both you and franchisee. If you don't the courts may not be swayed in your favor.
Failure to maintain standards is another good cause that can get franchisees terminated. There have been cases when businesses have been cited for lack of cleanliness, quality, and service. There are other instances in which franchisees have failed to operate their businesses in a responsible fashion. Termination was permitted in the case of a franchisee who failed to renew a building lease agreement, costing the franchise additional rental charges.
Sales are at the core of most businesses. Franchise management have goals they expect their owners to meet. Failure to meet those goals, if they are reasonable, can constitute a breach of the contract. Franchises have to be profitable to remain viable. In cases where franchises have become insolvent, or a franchisee neglects to sell the product or service in a section of its territory, the franchises have been terminated.
Following procedures is important if a franchise truly intends to terminate a franchisee. The exact procedural process varies from state to state. Franchisors are required to notify a franchisee about the termination in advance. Notifications must include a line item listing of the franchisor's objections and the exact date of the cessation. In cases where a breach is curable, the franchisor must give the franchisee a time frame to correct the objections.
A franchisor must give a franchisee enough time to attempt to cure the breach unless it is determined that the breach is incurable. The time frame allotted must be sufficient for the franchisor to correct the problems. If a court decides the franchisee was not given sufficient time, it can prohibit the termination.
Franchises can be great opportunities for those interested in opening a business with an established reputation. It comes with responsibility though. Franchises are not independent operations. They come with obligations and restrictions that, once agreed to, must be upheld.
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