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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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I am a franchisee in the UK. My initial franchise term expired

Resolved Question:

I am a franchisee in the UK. My initial franchise term expired 2.5 months ago, however my business has continued to trade and pay royalties and ad fund contributions as always. I have not yet sent in written notice to the franchisor of my intention to renew even though we have passed the 5 year initial term mark. My business is not in breach of any terms of the agreement and the franchisor has continued to take my royalty payments and ad fund contributions. The franchisor has also helped me in negotiating a new 5 year term lease with my landlord to ensure I remain on the premises on which we have traded for the last 5 years. Can the franchisor at any time decide to terminate the agreement and choose not to renew the agreement even though we have passed the 5 year mark?
Submitted: 2 years ago.
Category: Law
Expert:  Ash replied 2 years ago.
Alex Watts :

Hello my name is ***** ***** I will help you with this.

Alex Watts :

What does the contract say about renewal etc?

Customer:

It says there is a renewal procedure: that the franchisee should give notice of intention to renew within 3 months prior to date of expiration of the initial term. And within 60 days of receipt of this notice, the franchisor should give notice of reasons of not choosing to renew this agreement if it so chooses. The franchise agreement also has a non-renewal clause which says that Master Franchisee shall give Franchisee written notice of its election not to renew the franchise at least ninety (90) days prior to the expiration of the initial term of this Agreement. Master Franchisee's failure to give such notice shall not act to affect a renewal or extension of this Agreement or confer any other rights upon Franchisee. My solicitor who reviewed my initial franchise agreement also agreed some amendments to the renewal clause which says that only material breaches that cannot be remedied within 21 days will preclude the Franchisee from renewing the Sub Franchise agreement at each renewal term.

Alex Watts :

Ok. Does it say anything about the agreement continuing or is it for a fixed period?

Customer:

It says..

A. Initial Term. This Agreement shall be effective and binding from the Effective Date described in Paragraph XXVII hereof for an initial term equal to five (5) years commencing on such date.

B. Renewal Terms. Franchisee shall have the right to renew this franchise before the expiration of the initial term of the franchise for two (2) additional successive terms equal to five (5) years each, providing all of the following conditions hereinafter set forth have been fulfilled prior to any such renewal:

Customer:

As far as compliance with terms of the agreement my company is in full compliance except that I havent sent in this written notice

Customer:

Hi Alex, Are you there? Its just that the website keeps saying you have stepped out of the chat. Not sure if there is a problem with the online system?

Alex Watts :

In theory there is no contract so there is nothing to terminate.

Alex Watts :

But as ever party has been carrying then it could be argued that the time for termination has expired.

Alex Watts :

However you should also have given notice you wanted to renew. You should do this now.

Alex Watts :

However if the franchisor decides not to renew you could challenge that in Court.

Alex Watts :

But as it stands you have no agreement, so it could be stopped.

Alex Watts :

Not terminated as such. But you almost have an agreement at will.

Alex Watts :

That is, the agreement is not fixed it is simply rolling on. There is no new agreement signed.

Alex Watts :

As such you need to renew asap.

Alex Watts :

Can I clarify anything for you about this today please?

Customer:

When you say it could be stopped - are you referring to the fact that a challenge in court can be stopped?

Alex Watts :

You rated poor service?

Alex Watts :

The franchise could be ended.

Alex Watts :

You dont have protection. Your agreement is at an end.

Alex Watts :

Therefore you need to renew asap.

Alex Watts :

Your current franchise could be stopped (terminated). There is no franchise agreement in place - it has ended.

Customer:

Ok. Thank you.

Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience: Solicitor with 5+ years experience
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