Franchises are great ways for entrepreneurs to own a business without having to start from scratch. The products and services they offer already have name recognition and an established organizational network. Franchising management teams work hard to make sure their owners have upstanding reputations and good work ethics before accepting them into the organization. Things can go wrong however, and a franchise termination Illinois owners try to avoid is the result.
In most states franchises can terminate relationships for good cause. This usually means that the franchisee has failed to comply with the contractual requirements of their agreement. As the franchisor, you need to make sure that agreement covers a wide range of misbehavior. One of them would be damage to the franchise's reputation. This might include a franchisor pleading no contest or being convicted of fraud or some other felony.
If for some reason an owner is caught selling fraudulent or competing merchandise using the franchised trademark, the owner may be terminated. The language prohibiting this must be included in the signed agreement however. There have been cases where this prohibition was not included in the contract, and a court decided that the owner was within his rights.
Failure to maintain the standards of a franchisor can be considered a breach of the contract. Owners whose businesses were cited for a lack of quality, service, or cleanliness have been terminated. Franchises that are not operated in a responsible fashion are in jeopardy of having an agreement terminated. One such case involved a franchisee who allowed a building rental agreement to lapse, costing the franchisor unnecessary rental charges.
Owners of franchises go into their businesses knowing there are sales expectations involved. If they fail to meet those expectations, termination can follow. The sales goals must be reasonable, but if they are, and the franchisee is unprofitable, the franchisor will have a case. In the case of a franchisee becoming insolvent or not including an entire territory in the sales effort, the franchisor can sue for cessation.
Following procedures is important if a franchise truly intends to terminate a franchisee. The exact procedural process varies from state to state. Franchisors are required to notify a franchisee about the termination in advance. Notifications must include a line item listing of the franchisor's objections and the exact date of the cessation. In cases where a breach is curable, the franchisor must give the franchisee a time frame to correct the objections.
If the breach is incurable, cessation can be immediate. Otherwise the franchisor must allow the owner an adequate amount of time to correct the situation. If the franchisee challenges the termination in court, the length of time allowed for correction can play an important part in a judge's decision to allow the termination or prohibit it.
Owning franchises can be wonderful opportunities for ambitious entrepreneurs. It is not the same as owning a business outright however. The opportunity can be taken away fairly quickly when the contract is breached.
In most states franchises can terminate relationships for good cause. This usually means that the franchisee has failed to comply with the contractual requirements of their agreement. As the franchisor, you need to make sure that agreement covers a wide range of misbehavior. One of them would be damage to the franchise's reputation. This might include a franchisor pleading no contest or being convicted of fraud or some other felony.
If for some reason an owner is caught selling fraudulent or competing merchandise using the franchised trademark, the owner may be terminated. The language prohibiting this must be included in the signed agreement however. There have been cases where this prohibition was not included in the contract, and a court decided that the owner was within his rights.
Failure to maintain the standards of a franchisor can be considered a breach of the contract. Owners whose businesses were cited for a lack of quality, service, or cleanliness have been terminated. Franchises that are not operated in a responsible fashion are in jeopardy of having an agreement terminated. One such case involved a franchisee who allowed a building rental agreement to lapse, costing the franchisor unnecessary rental charges.
Owners of franchises go into their businesses knowing there are sales expectations involved. If they fail to meet those expectations, termination can follow. The sales goals must be reasonable, but if they are, and the franchisee is unprofitable, the franchisor will have a case. In the case of a franchisee becoming insolvent or not including an entire territory in the sales effort, the franchisor can sue for cessation.
Following procedures is important if a franchise truly intends to terminate a franchisee. The exact procedural process varies from state to state. Franchisors are required to notify a franchisee about the termination in advance. Notifications must include a line item listing of the franchisor's objections and the exact date of the cessation. In cases where a breach is curable, the franchisor must give the franchisee a time frame to correct the objections.
If the breach is incurable, cessation can be immediate. Otherwise the franchisor must allow the owner an adequate amount of time to correct the situation. If the franchisee challenges the termination in court, the length of time allowed for correction can play an important part in a judge's decision to allow the termination or prohibit it.
Owning franchises can be wonderful opportunities for ambitious entrepreneurs. It is not the same as owning a business outright however. The opportunity can be taken away fairly quickly when the contract is breached.
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