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Termination of franchise agreements 'should not scare firms'

Published on 1 Jun 2009 under category: legal

Termination of a contract should not be something that a franchisor is scared of, an expert asserts.

Terry Mullens, recruitment director for Revive! Auto Innovations UK, tells The Franchise Magazine that this should not be a decision that is entered lightly and must be considered a last resort.

Despite this, she says it could be necessary in certain situations to exit franchise agreements in order to protect the brand and other members of the network.

Among the provocations which could justification this are acts of fraud by franchise owners or where they provide poor service or workmanship, she tells the news provider.

Ms Mullens states: "In this instance, a franchisor must first try all means available to them to improve the performance of the errant franchise owner but may in the end have to act firmly to protect their brand reputation."

Andrew Pena, managing director of Cubism Law a firm of solicitors which specialises in franchise litigation, adds: "Prior to terminating a franchise agreement, it is key that the franchisor properly understands the lawfulness of the action they want to take and follows the process outlined in the franchise agreement. In many cases, simple breaches of the franchise agreement may not entitle the franchisor to terminate unless proper prior written warnings have been provided. On terminating the agreement, the franchisor needs to be ware of the post-termination provisions of the franchise agreement since this may well entitle them to take over telephone lines and customers of the exiting franchisee and stop them from continuing to trade."

In other news, a recent study by Natwest and the British Franchise Association has found that the number of franchises in the UK that were trading profitably in 2008 had not decreased from 2007.