Franchise Agreements‚ Incurable Breaches and Termination
When the relationship between franchisor and franchisee begins to break down‚ inevitably‚ a franchisor will send default notices and claim that the franchisee has breached his or her franchise agreement. Sometimes the alleged breach is claimed to be so significant that the breach is alleged to be "incurable" and that the franchise agreement is therefore terminated. "Curable" breaches are those wherein the franchisor provides you with a "notice of default" and you are given a limited period of time wherein you must "cure" what you are alleged to have done wrong.
The Mistake that many Franchisees Make
When it comes to franchise agreements and franchise defaults one critical mistake that franchisees often make is that they fail to respond to the default notices. If the default notice relates to a "curable" breach by not responding you will be converting what was once curable into an uncurable default wherein the franchisor will terminate your franchise agreement and legal rights. It is critical that when you receive a default or termination notice that you speak with your franchise lawyer about preserving your legal rights in the franchised business and challenging the alleged default.
Some common examples of what constitutes an uncurable default‚ includes:
- Not resonding to a prior notice of default;
- Not curing a prior default or defaults‚ including problems with the operations of your franchised business;
- Suspending your business operations;
- Transferring your franchise business without consent of the franchisor;
- Filing bankruptcy and/or becomming insolvent;
- Conviction in a criminal proceeding; and
- many other violations that harm the goodwill of the business and are not subject to fixing and undoing.
Licensing vs. Franchising