What Happens When A Franchise Agreement Expires

From the franchisee`s point of view, the main reason for terminating a franchise agreement or not renewing it is profit. This means that the franchise business does not generate enough profit and the franchisee therefore ceases business activities. Another contribution to the termination of a franchise agreement relates to the underlying lease when the franchisee loses the lease or rent increases make the franchise business unprofitable. The franchise agreement often provides that the franchisor has the opportunity to acquire the company`s assets (equipment, accessories, vehicles and other assets) at their fair value. This often corresponds to the book value. There will be no obligation for the franchisor to pay anything for the goodwill of the business, so the franchisee will be in a very weak position after the expiration of the term. To the extent permitted (as some states do not apply them), separations of competition are important for the former franchisee and franchisor after the end of the franchise relationship. In the absence of a non-compete obligation, the former franchisee`s re-brand change becomes absolutely essential for the franchisor, and the obligation of „immediate“ compliance is likely to be strictly enforced. If a non-compete obligation is in place, the franchisee must plan from the outset what their next step will be after the end of the franchise relationship. Most franchise agreements contain an extension clause that might look like this: Unfortunately, not all franchisor-franchisee relationships end amicably.