What to Do if Your Franchisor Issues You With a Breach Notice 

Receiving a breach notice from your franchisor can be a daunting experience, but it is essential to understand that it is a formal communication that requires immediate action. A breach notice outlines the violations of the franchise agreement and provides you with a set timeframe to address these issues. The franchisor expects you to address specific issues within your franchise operations. Acting promptly and thoughtfully is key to maintaining your franchise relationship and avoiding further legal complications.

This article explains what steps you, as a franchisee, should take if you receive a breach notice from your franchisor.

1. Read the Breach Notice 

The first step is to carefully read the breach notice and understand which provisions of the franchise agreement the franchisor believes you have breached. The notice should highlight the specific terms you have violated and how this occurred. If the franchisor does not provide this information, request clarification. It will be challenging to address or dispute the issue if you do not understand what went wrong. 

Think carefully about what the franchisor has communicated to you. Since a franchise agreement is a legally binding document, breaching its terms is a serious matter as they represent contractual obligations. Breaches can lead to:

• legal action;
• financial penalties; and 
• potential termination of the agreement. 

Termination means losing the business you have built and invested time and money into, so prompt action is necessary. 

2. Keep Records 

Throughout this process, keep detailed records of:

• all communications between you and the franchisor; 
• any documents exchanged; and 
• the actions you take to resolve any breaches. 

This documentation will be essential if the dispute escalates or legal action becomes necessary. 

For example, if the franchisor contacted you when issuing he breach notice and communicated their concerns verbally or via email. If so, you should keep a record of this conversation and any other relevant discussions. 

3. Rectify the Breaches 

You should take immediate action if the franchisor’s notice is reasonable and highlights how you have breached the terms of the franchise agreement. If you can resolve the issue quickly, do so without delay. 

Some breaches may be harder to fix within a short timeframe, or they may require you to invest more money into your business. If this is the case, discuss these challenges with your franchisor and explain why you may need more time or support to resolve the problem. If the issue is related to your processes, you may want to create a long-term performance plan, which could reassure the franchisor. 

4. Communicate with the Franchisor

You should maintain open lines of communication with the franchisor, particularly during this time. Failing to do so could worsen the situation and make the franchisor believe you are not taking action. Keep them informed about the steps you are taking. This will show your commitment to resolving the breaches and may help prevent further escalation of the dispute. Maintaining a positive commercial relationship with the franchisor will be beneficial in the long term. 

5. Negotiate if Necessary 

Sometimes, you may need to negotiate with your franchisor to resolve the breach notice. Your negotiations might involve: 

• requesting an extension of the timeframe to fix the breaches; 
• proposing alternative solutions to address the franchisor’s concerns; and
• seeking to amend the terms of the franchise agreement if you believe they are unreasonable or unclear. 

If you cannot remedy the breach or believe the notice is invalid, inform your franchisor. If you wish to dispute the breach notice, follow the franchisor’s dispute resolution process. This should be outlined in your franchise agreement or operations manual, and may require an initial discussion, followed by mediation or arbitration. 

6. Seek Legal Advice 

It can be vital to consult a franchise lawyer as soon as possible. A lawyer can:

• provide a professional legal assessment of the breach notice;
• help you understand the legal implications of the breach and potential consequences; and
• advise you on the best course of action, which may include rectifying the breaches, negotiating with the franchisor, or disputing the notice.

Additionally, if you are struggling, seeking legal advice early can help prevent breaches from occurring, saving you from unnecessary formalities and costs. Having a clear understanding of your franchise agreement and your responsibilities is essential. 

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Key Takeaways

If your franchisor serves you a breach notice, it is a serious matter that requires immediate and careful attention. You should:

• carefully read and understand the breach notice; 
• keep records of all communication with the franchisor; 
• rectify the breaches, logging the actions you take; 
• maintain open lines of communication; 
• negotiate with the franchisor if necessary; 
• follow the franchisor’s dispute resolution procedure to challenge the breach notice; and
• seek legal advice if necessary.

Understanding and following these steps can protect your business interests and help maintain a positive relationship with your franchisor. Throughout the process, clear communication and a proactive approach are essential to resolving the situation and ensuring the continued success of your franchise location. 

If you require legal advice regarding a breach notice, our experienced franchise lawyers can provide assistance as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and help with drafting and reviewing your documents. Call us today on 0808 196 8584 or visit our membership page.

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