How to Terminate a Franchise Agreement in the UK

If you have entered into a franchise agreement that is not working for your business, you might consider terminating the agreement for several reasons. For example, you may find that your franchisor is not assisting you correctly or that the franchise business is not profitable. This article will explain your potential options and regarding how to terminate your franchise agreement in different circumstances.

What is the Franchise Agreement?

Firstly, it is essential to consider the franchise agreement and how it will define the relationship with your franchisor. A franchise agreement is a legal document you must sign to enter into a contract with your franchisor. It will usually explain your relationship with your franchisor, including how your franchisor will assist you. It should also break down your payment obligations, including the franchise fees and royalty fees. 

In this way, the franchise agreement defines your obligations and duties concerning the franchise business. In addition, it usually includes terms that outline what will happen when something goes wrong. 

Moreover, it is important to note that there is no specific franchise law. However, your franchise agreement will outline your ability to terminate the contract. Furthermore, you may not have a right to terminate the agreement by giving notice. Therefore before agreeing to the contract, you must first look at the terms within it to identify how you may potentially end the agreement if need be.

Understanding Your Franchise Agreement

Before signing, the first thing to consider is whether your franchise agreement has a termination provision. For example, specify before entering into the agreement that you wish to be able to terminate the contract under certain conditions. You should be able to exercise that provision. 

If your franchise agreement does not have a termination clause, the next thing to consider is the franchise agreement’s duration. The franchise agreement should outline the period that the contract will be in force. Typically, a franchise agreement will last for a fixed term of five years or more. However, you can usually extend the franchise agreement if both parties agree. If you have a fixed-term agreement, you may want to wait for this term to end. Then, you can decline to renew your agreement. If this is not an option, you might want to consider other alternatives.

How Can I Make End the Agreement?

You may be able to end the franchise agreement if the franchisor breaches the terms of the contract. For example, the franchisor may:

• fail to provide you with the level of training that they said they would;
• commit fraud; or
• have gone bankrupt. 

In this case, you would have sufficient reason to end the franchise agreement in any of these cases. However, the franchisor may draft their obligations towards you in an unclear way. If this is the case, you may still be able to terminate the agreement with the assistance of a lawyer. You can do this if the franchisor has done something that deprives you of receiving the full benefit of the contract.

Alternatively, you may also be able to end the franchise agreement under misrepresentation. Misrepresentation is a false statement that implies a fact that influences your decision to agree. If you argue for misrepresentation, a court may rescind your contract. Rescinding a contract means that you fall back into your position before signing the agreement. In your case, this could mean that you get your money back as part of the franchise fee. Additionally, you may also need to give back any benefits as part of the franchise agreement.

How Can I Make Sure I Have Made the Right Decision?

Dealing with a termination clause or a breach of contract can be challenging. For this reason, it is a good idea to seek legal advice if you are planning on terminating your franchise agreement before the end of the franchise term. This will ensure you review all options before you end the agreement. Additionally, it is good to try to talk to the franchisor before ultimately terminating the agreement to understand your options further.

Key Takeaways

As a franchisee, you may wish to terminate your franchise agreement. First, if the other party breaches the contract, you can terminate your agreement. Otherwise, you may want to check if there is a termination clause in the franchise agreement which you may be able to exercise. In any case, it is a good idea to seek legal advice if you are dealing with the interpretation of terms within a franchise agreement.

If you need help with terminating your franchise agreement, 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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