By Roy Schneider, Esq.
Buying a franchise can be a great opportunity for an entrepreneur to start a business using a successful operational structure of a proven model. Despite all the resources that a franchise provides, not all are successful. Unfortunately, with most franchises, you can’t just shut your doors and cut your losses; getting out of a franchise agreement can be difficult, leaving a once hopeful entrepreneur stuck in a business that may not be profitable or enjoyable to operate.
If you are looking for a way out of a franchise agreement, it’s absolutely imperative that you contact an attorney who has experience with franchise law and understands the many complexities of the franchisor-franchisee relationship. In determining whether you can terminate the agreement, you will need to carefully review the contract which should clearly outline the circumstances which must be met for either party to terminate it. If the franchisor has not met all of its duties, such as failing to send you the marketing plan and materials for the spring line, you will likely have a much stronger case for ending the relationship. Be sure to document any shortcomings or errors made by your franchisor and keep records of any correspondence which have expressed these concerns.
Even if you are able to close shop and terminate the franchise agreement without any substantial fees or legal ramifications, you may still be adversely affected by non-compete and/or confidentiality clauses contained within the agreement. Very often, franchise agreements prohibit franchisees from starting a similar business within a certain period of time and within a certain number of miles from the franchise location. Also, they may prohibit you from contacting any customers from your former franchise, severing long-time business relationships and limiting your ability to be successful with a new venture.
An experienced attorney can help you understand your rights, serve as your advocate in discussions with the franchisor and protect your best interests so you can confidently move on with your entrepreneurial aspirations. Whether you are considering purchasing a franchise, closing up shop, or simply severing ties with the franchisor, it is worthwhile to review your options with an attorney well versed in franchise matters. The business attorneys at Schneiders & Associates, L.L.P. are available to assist you in maximizing your investment and minimizing the risks associated with your franchise.