While the subject of franchise agreement termination is much more complicated than it tends to appear at first glance, the following well-established ‘best practices’ will help to minimize problems that could occur at a later date if the two parties were to become more hostile to each other and their positions more polarized:
- Retain a lawyer familiar with franchising when preparing or reviewing a franchise agreement in advance of a franchise purchase.
- Make sure the franchise agreement is clear and unambiguous when it comes to issues of default and termination, so both parties fully understand their rights and obligations.
- Act honestly and in good faith when meeting obligations and enforcing rights under the terms of the franchise agreement.
- If legal action appears to be necessary, retain a lawyer who is familiar with franchise litigation procedures and other applicable areas of law.
- In preparing or reviewing the franchise agreement, give serious consideration to the possibility of mediation or arbitration as a means of resolving disputes relating to default and/or termination issues well before they lead to time-consuming and expensive litigation.
Termination of a franchise agreement should be addressed only as a last resort after all reasonable efforts to resolve a dispute have been carefully considered. Nobody wins when an agreement is terminated, though there are certain circumstances that may arise where termination is the only remedy that makes sense. With this in mind, proactive steps should be taken at the outset to help make termination as painless as possible to all parties involved.
Frank Zaid practised franchise law for 40 years. Today, he is a franchise mediator, arbitrator and ombudsman with ADR Chambers in Toronto, where he chairs a specialty panel to resolve franchise disputes. He also operates his own franchise support services business, Frank Zaid FRANlegal Support Services. For more information, contact him at (416) 322-8300 or (416) 362-8555 or via e-mail at email@example.com or firstname.lastname@example.org.