How to End a Franchise Agreement

Ending a franchise agreement is never a decision to be taken lightly. Whether it stems from a life change, a dispute with the franchisor, or a new professional opportunity, terminating this type of commitment is governed by strict rules.

How to End a Franchise Agreement

Starting a franchise can be a once-in-a-lifetime professional adventure. While many find it rewarding, some choose at some point to end it. How can you proceed to avoid accusations of wrongful termination? Here are the best practices to know.

Anticipate the deadline to avoid automatic renewal

Most franchise agreements are signed for 3, 5, or 7 years, with automatic renewal upon expiration. In such cases, it is usually sufficient to notify the franchisor within the prescribed deadlines of your intention not to renew.

If the duration is indefinite, a "reasonable" notice period must be respected to allow both parties to make arrangements.

Who can initiate the termination?

From the franchisee's side

A franchisee can request termination for various reasons: change of professional plans, retirement, loss of interest in the business, or non-compliance by the franchisor with its obligations (advertising, support, etc.).

From the franchisor's side

The franchisor may terminate the contract if the franchisee:

  • fails to pay royalties,
  • transfers rights without authorization,
  • provides false information that harms the brand,
  • becomes unable to operate,
  • violates the exclusivity clause by sourcing elsewhere.

The procedure to follow

Terminating a franchise agreement follows a formal procedure. It must be notified by registered letter with acknowledgment of receipt and include:

  • an explicit request for termination,
  • a valid reason,
  • the identities of the parties,
  • the date of sending,
  • any resolution period.

After termination

The franchisee may keep their business but can no longer operate under the brand. They must return all equipment, signage, and items provided by the franchisor, as well as manage remaining stock. The business can be sold to a buyer approved by the franchisor.

In conclusion

You don’t sign a franchise agreement thinking about termination, but including a termination clause from the start helps avoid many disputes. As the saying goes: prevention is better than cure.

By the editorial team of AfricaFranchise.com