Termination of a Franchise Agreement

Termination comes as a result of the Franchisor ending your agreement before the term called for in the Franchise agreement. Non-renewal occurs if the franchisor refuses to renew the franchise at the end of the term. In either scenario the end result is the same, the Franchisee is out of business. Under New Jersey Law the franchise relationship law requires good cause for non-renewal by the franchisor. A de facto a non-renewal might occur if the franchisor imposes unreasonable changes in the royalties, fees and terms of the franchise, where the changes make it so the franchisee is unable to renew.
In New Jersey, a franchisor must have good cause to terminate or to refuse renewal of the franchise. Good cause includes failure by a franchisee to cure a breach of the Franchise Agreement within a reasonable cure period after written notice of default. The agreement may provide for certain non-curable defaults which may allow for termination immediately upon written notice. Common breaches include the non-payments of franchise fees, failure to meet sales, damage to franchisor reputation, sales of competing products and under reporting of sales.
If you are noticed of a possible termination or non-renewal you need to address the notice and be proactive. For if the business is closed you will not have the monies flowing from operation of the same to pay for your legal battle. Furthermore, it easier to keep the doors open than it is to reopen them once closed. As soon as you get the notice contact your business lawyer to get channels of communication flowing in order to address the issues. If you have a Franchise issue or question call our Howell Commercial Lawyers today.