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What Are My Renewal Rights as a Franchisee?

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As the expiration date of your franchise agreement approaches, the decision to renew is critical in determining your business’s future. Renewal entails a franchisee intending to extend their contractual relationship with the franchisor. A successful renewal involves discussions, negotiations and adherence to specific terms in the existing franchise agreement. Renewal secures the continuation of a franchise business for a subsequent term. This article will explain where franchisees can find their renewal rights and how to navigate the renewal process. 

Franchise Agreement Renewal 

In the UK, the franchising industry is not subject to specific regulation. Franchise agreements between franchisees and franchisors form the legal basis of all franchise relationships. This agreement determines the shape of the relationship and its duration, including termination and renewal terms. 

Franchise agreements are operational for a specified term. Franchisees can choose to renew the franchise agreement at the end of this term. You will find your renewal rights in the franchise agreement.

Steps to Renewal

Let us explore the key steps to renewing your franchise agreement.

1. Renew Franchise Agreement Terms

Ensure that you thoroughly read the terms of the existing franchise agreement. Pay special attention to renewal conditions, notice periods and further requirements. 

Remember that timing matters. Adhere to any specified timelines for expressing interest in renewal and submitting documentation. Failure to meet deadlines could impact the renewal process. The franchisor should have outlined the renewal process within the agreement. Become familiar with this well before the end of your term, as you will need to express intent to renew before the agreement’s expiration date. 

You should also check renewal fees when you review the agreement. The franchisor should set these at a manageable rate. 

2. Initiate Early Communication

Start the discussion on renewal well before the agreement expires. Early communication demonstrates commitment and allows both you and the franchisor to plan for the future. 

Clearly express your interest in renewing the franchise agreement. You may do this through formal written notice or by scheduling a meeting with the franchisor. Ensure that you document all of this communication and keep records. Your records will be especially helpful if you encounter difficulties further down the line. Your records should include:

  • written notices; 
  • emails and any other communications; and
  • any agreements reached during discussions with the franchisor. 

3. Assess Performance 

You may need to evaluate your franchise business’s performance and demonstrate how it aligns with the franchisor’s brand standards. Such assessment may be essential to prove to the franchisor that you have met certain conditions associated with renewal. Highlight any successes, improvements and achievements you have had during the current term. 

You may need to provide financial records demonstrating your ability to meet ongoing financial obligations, including royalty fees. Furthermore, you may need to prepare a renewal proposal that outlines your vision for the future, marketing strategies and any plans for business growth under the renewed agreement. 

4. Sign the Renewal Agreement 

Renewing a franchise agreement will mean signing a renewal agreement. A lawyer can review this agreement for you. Legal advice can be beneficial to avoid difficulties in the renewal process and to ensure the renewal agreement is favourable. A lawyer can ensure you comprehensively understand the renewal terms and any legal implications associated with the process. This is especially important as the franchisor may set different terms to the original franchise agreement. 

You will have successfully renewed your franchise business for another term when you sign this document. 

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Non-Renewal of the Agreement 

When your franchise agreement renewal process ends, you have two options: renewal or non-renewal. You do not have to renew the agreement if you do not want to. 

Be aware that some terms will still apply even when the agreement is no longer in effect. These include non-compete clauses, which can prevent you from engaging in similar business activities for a specified period. 

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Key Takeaways 

The renewal process is an opportunity to reaffirm your commitment to the franchise and showcase your business’s potential for ongoing success. Open and transparent communication with the franchisor is critical to a successful renewal. 

When we discuss franchise agreement renewal, we are talking about the renewal of a legal contract. Therefore, it is a great idea to seek legal advice about your renewal rights. When entering into a franchise agreement, it is vital to check the renewal terms. A lawyer can help you review these and advise you accordingly. 

This article has discussed specific stages in the franchise agreement renewal process. These include the following: 

  • seeking legal advice; 
  • reviewing the terms of the franchise agreement; 
  • initiating early communication with the franchisor; 
  • expressing your intention to renew; 
  • evaluating your business’ performance; and
  • signing a renewal agreement. 

You do not need to renew your franchise agreement if you do not want to. Either way, you must follow the terms set in your existing agreement to avoid breach of contract and ensure a smooth exit or transition into a subsequent term. 

If you need help identifying your franchise agreement renewal rights, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page

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