Then-current franchise terms? Expensive updates to your franchised outlet? These are just two of the many issues franchisees tend to face upon renewal.
Franchise agreements expire. This is a reality of life for franchisees, and one that often hits hard when it comes time to renew. For a variety of reasons, your franchisor may want you out of its system; or, even if it is willing to let you stay, it may want you to abide by an entirely new set of terms and conditions.
As a franchisee, protecting your rights in a renewal situation can be a challenge. Franchisors believe they have all of the leverage (and sometimes, though not always, they do), and they are more than willing to use it to force their loyal franchisees to accept harsher terms. To make sure you have a fighting chance during your renewal term, it is important to hire an experienced franchise attorney to review your franchise agreements (existing and new) and negotiate with your franchisor on your behalf.
Negotiating a Franchise Renewal
Understanding Your “Right” to Renew
In many franchise systems, franchisees are offered a right to renew. However, this “right” is often subject to a number of different conditions, and as a result barely constitutes a right at all. Some of the most common renewal conditions we see include:
- Renewal periods – If you wait too long to send notice of your intent to renew (which often must be sent months in advance), you may miss out on your opportunity to continue operating under the franchisor’s system.
- Then–current franchise terms – Rather than continuing to operate under your existing franchise agreement, you must agree to the franchisor’s “then-current” terms. This often means a higher royalty and even more-limited rights and protections.
- Upgrades – You may also be required to upgrade your outlet to strictly adhere to new brand and system standards (at your expense, of course).
- Obligations to cure – If your franchisor can point to anything you have done and argue that it is a breach of your franchise agreement, you may be required to “cure” the breach before you can exercise your right to renew.
As a result, when seeking to renew, it is critical to prepare early and make sure you have a franchise attorney review your existing agreement in detail. If your franchisor wants you out or wants to lean on you to make changes, getting started on the renewal process early can be critical to protecting your right to renew.
Top Tips for Franchise Renewals
If you are intending to renew your franchise agreement, here are five key tips to keep in mind:
- Make sure you know when you have to provide notice to your franchisor.
- Be careful to avoid any action that might put you in breach of your franchise agreement.
- Review the current system standards and make sure you are able to comply.
- Understand the hoops you will need to jump through in order to renew.
- Hire a franchise lawyer to review and negotiate the “then-current” franchise agreement.
Wrongful Refusals to Renew
At the Goldstein Law Firm, we also regularly represent franchisees who are reeling in the face of a wrongful franchise non-renewal. It is always best to seek help before you get to this stage (which is why we recommend getting started on the renewal process early); but, if you have been kicked out of your franchisor’s system, we may still be able to help you protect your rights.
For example, in addition to the terms of your franchise agreement, franchise laws in your state may prohibit franchisors from unreasonably denying franchisees’ requests to renew. We are familiar with all state franchise laws and can help you use them to your advantage.
Speak With National Franchise Lawyer Jeff Goldstein About Your Franchise Renewal
To get help understanding your options and find out more about what you may need to do to renew your franchise, contact the Goldstein Law Firm for more information. Call 202-293-3947 or contact us online to schedule a free consultation with franchisee lawyer Jeff Goldstein today.
