Q&A

Question: When can a Franchisor terminate a Franchise Agreement?

A Franchisor can seek to terminate a franchise agreement if it is breached, i.e. if the franchisee fails to do something required of them, or if they do something that they are restricted from doing. There are however, strict rules that must be followed by the Franchisor before a franchise agreement can be terminated (excluding the few exceptions where a franchise agreement can be terminated immediately – refer to clause 29 of the Franchising Code). These rules require a Franchisor to provide a Franchisee with:

1. notice that they intend to terminate the franchise agreement;

2. information on how the Franchisee can remedy the breach; and

3. how long the Franchisee has to remedy the breach (this must be reasonable but need not be more than 30 days).