Generally, franchise agreements are drafted in a way that makes it very difficult for a franchisee to end a franchise agreement. Franchisees are, however, able to transfer their franchise agreements to another person. Here are the various ways a franchisee can end a franchise agreement:
At the end of the franchising term
Perhaps the most obvious answer is that a franchise agreement will terminate automatically at the end of the term. Unless the franchisee has sought to renew the franchise for an additional term, the franchise agreement will terminate on completion of the term.
Cooling Off Period
A franchisee can end a franchise agreement within seven days after signing the agreement. This is known as the cooling off period.
Franchise Agreement allows termination
Some franchise agreements allow the franchisee to end a franchise under certain circumstances. Such clauses are not common and are often only seen in franchise agreements with long terms of 15 years or more.
Selling a franchise
A franchisee can sell their franchise agreement to another person. By law, the franchisee must first obtain the written consent from the franchisor, which cannot be unreasonably withheld. This is the most common way to end a franchise agreement prior to completion of the term.
Franchisor’s right to terminate
The franchisor has more opportunities to end a franchise agreement, including where the franchisee has not remedied a breach or a right of termination may be granted under the terms of the franchise agreement.
We have provided a general overview of when you can end a franchise agreement. The franchise agreement will outline in detail how you can end the franchise agreement, either by selling or terminating the agreement. We always recommend you speak with a franchise lawyer to help you understand your options and ensure you fully understand your rights and obligations under the franchise agreement.
For more information regarding the circumstances under which you may end a franchise agreement, it is advisable that you speak with your franchise lawyer. Your franchise lawyer will give you a better understanding of any relevant notice or procedural requirements that might be necessary to ensure you are able to terminate the franchise agreement smoothly.