What Does “Nonrenewal” Of A Franchise Mean and Involve?

If you are in the business of selling franchises, there will come a time when you must renew the franchise agreement with your franchisees. However, if you don't want to renew a franchise agreement, there are laws to restrict you from refusing to do so. In such cases of the nonrenewal of a franchise, your ability to refuse will depend on the state where your franchise agreement is held.

For instance, franchise relationship laws in Delaware, Hawaii, Iowa, New Jersey, Rhode Island and Wisconsin require good cause for the nonrenewal of a franchise. Iowa requires 6 months notice of your intention not to renew (unless both parties agree to the nonrenewal).

Some states, such as California, permit nonrenewal of a franchise in certain cases. California permits nonrenewal upon 180 days notice for specified reasons, such as the failure by a franchisee to agree to the standard terms of the renewal franchise. In Connecticut, the franchisor is allowed to not renew the franchise if the franchisor sells the premises on which the franchise is located, or converts it for another use.