You’ve just signed up the next 5 years of your life to managing and operating a franchise. It seemed like a great idea, the people you were negotiating with were nice, you liked the products and services you sold and your customers were great. However, business has started, reality kicks in and business is not quite going as expected and you’ve signed the contract. What now?
Luckily for you, our expert franchise lawyers can assist.
Do you have a Cooling off period?
If you have already signed your franchise agreement, you will generally be able to exercise your right to terminate the agreement within the “cooling off period”.
What is a cooling off period in franchise law?
You’ve probably come across this term before. It’s a specific time period within which you may exercise your right to terminate the franchise agreement.
Generally, for a franchise agreement the cooling off period is 7 days. Sometimes a franchisor will give you more, but 7 days is the minimum.
Any deposits that you have paid to the franchisor within this time will be refunded to you. However, any expenses that the franchisor may have incurred in order to train you within this period may not be refunded to you.
Do you have any remaining obligations after terminating during the cooling off period?
You will be released from most of your obligations under the franchise agreement if you terminate it during the cooling off period. However, you may still be subject to certain confidentiality provisions and be required to uphold the intellectual property rights of the franchisor even after termination.
At Franchise Ease, we highly recommend that you understand your obligations in terms of non-disclosure of the franchisor’s confidential information, and are aware of the franchisor’s intellectual property rights so that you do not breach these obligations after the cooling off period.
If you are unsure of what your obligations are and how they apply to you, it is a good idea to get in touch with us to have these issues explained to you in detail.
What if the cooling off period has passed? What Now?
In the unfortunate circumstance that you wish to exit the agreement but the cooling period has passed, you must closely review the terms of the franchise agreement in order to figure out what your options are regarding termination.
The terms of the franchise agreement itself and the Franchise Code of Conduct will guide you.
Consider the following;
- Are there terms in the franchise agreement outlining in what circumstances you can terminate the agreement? If so, do these circumstances relate to you?
- Would you consider selling the franchise business? If so, consider the transfer and assignment clauses in your franchise agreement. Do you need to obtain the consent of the Franchisor?
- Are you in a dispute with the franchisor? If you want to terminate the contract because of a dispute with the franchisor, you may be required to undergo dispute resolution procedures before terminating the franchise agreement.
Generally, it is quite difficult for a franchisee to terminate a franchise agreement after the cooling off period and that is why is almost critical to obtain advice before signing franchise agreements. This is because the franchisor would have invested considerable time and expenses in training and setting up the franchise business for you to operate.
At Franchise Ease, our lawyers are here to help you review your agreements, before signing, during the cooling off period and after the cooling off period has lapsed.
