Franchise Termination Notice

 

Franchise Dispute Services

 

Franchise Termination

Frequently franchise disputes arise over the termination or purported termination of the franchise agreement by the franchisor.

 

The Franchising Code of Conduct (the Franchising Code) allows a franchisor to terminate a franchise agreement (provided that the franchisor follows the provisions set out in the Franchising Code):

 

If you have received a franchise termination notice you should seek advice from an experienced franchise lawyer as soon as possible.

 

 

Termination for Breach

A franchisor can terminate your franchise agreement if you have breached the franchise agreement and

  • the franchisor has provided you with a valid breach notice;
  • the franchisor has given you a reasonable time to remedy the breaches; and
  • you have not remedied the breaches within the time specified in the breach notice.

The Franchising Code of Conduct (the Code) provides that a franchisor does not have to allow more than 30 days for a franchisee to remedy the breach.

 

If you have received a franchise breach notice which provides that you must remedy the breach in a period which is less than 30 days, you should first check the provisions of your franchise agreement to see what the specified period under the franchise agreement is.

 

If the specified period under the franchise agreement is less than 30 days, or the franchise agreement picks up the wording of the Code that the "franchisor does not have to allow more than 30 days" (and the Franchise Breach Notice complies with the franchise agreement), then a consideration will need to be undertaken of whether the relevant period is reasonable.

 

Factors to be taken into account in assessing whether any period is reasonable include:

  • the type of breach;
  • whether you have previously received a notice for the type of breach;
  • if the breach relates to outstanding monies, whether you have been given time to pay the outstanding monies before the issuing of the notice.

 

 

 

Termination if you have not breached the Franchise Agreement

A franchisor can terminate your franchise agreement if the franchise agreement allows the franchisor to terminate the franchise agreement in certain circumstances and one of those circumstances has occurred.

 

For example if the franchise agreement requires you to obtain a Visa and you have been unable to obtain the Visa, or if the franchise agreement requires you to complete training to the satisfaction of the franchisor and you have not done so.

 

 

 

Termination in Special Circumstances

A franchisor can terminate your franchise agreement in certain special circumstances set out in the Code and your franchise agreement, including if

  • you no longer hold a licence that you must hold to carry on the franchised business;
  • you become bankrupt or an insolvent under administration;
  • you are deregistered (if you are a company);
  • you act fraudulently in connection with the operation of the franchise business;
  • you voluntarily abandon the franchise business or the franchise relationship;
  • you are convicted of a serious offence; or
  • you operate the franchised business in a way that endangers public health or safety.

 

If the franchisor proposes to terminate your franchise agreement on one of the grounds set out above:

  • and your franchise agreement was entered into before 1 July 2021

    Subject to the terms of the franchise agreement, the franchise agreement may be terminated immediately.


  • and your franchise agreement was entered into after 1 July 2021

    The franchisor is required to provide you with 7 days' written notice.

    In addition, if you  dispute the grounds of the proposed termination, you can notify the franchisor of the dispute and commence the dispute resolution process. If there is a dispute raised, the franchisor cannot terminate the franchise agreement until after 28 days from the provision of the proposed termination notice.

 

 

Not All Termination Notices Are Valid

If a franchise termination notice does not comply with the provisions of the Franchising Code of Conduct and/or your franchise agreement, the franchise termination notice may be invalid and you may have rights against the franchisor.

An experienced franchise lawyer can advise you about the options that are available to you.

 

Disclaimer

The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.

 

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