I am an existing franchisor having trouble with one of our franchisees. What are the next steps?
As a general rule, we counsel a three step approach to dealing with a franchisee who is not in compliance with the Franchise Agreement or Operations Manual.
First, it is always best to try and resolve things in an amicable way through a phone call or email.
Second, if an amicable approval does not work, we recommend a Notice to Cure in most cases.
Most franchise agreements are structured such that a franchisor can terminate a franchisee who is not in compliance with the Franchise Agreement. For some grounds of termination, an immediate termination with no cure period is permitted. And for other grounds of termination, a notice and opportunity to cure for some time period must be provided.
Third, for those grounds that allow for immediate termination, or where a notice to cure has been issued but the franchisee did not come into compliance, we recommend a Notice of Termination, ending the franchisee’s franchise agreement and rights.
Please note, however, several states have franchise laws that govern the termination of the franchise agreement and these laws may over-ride the franchise agreement. Therefore, it is critical that you seek the advice of a franchise attorney before issuing a Notice to Cure or a Notice to Terminate.