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Alex J.
Alex J., Solicitor
Category: Law
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Experience:  Solicitors 2 years plus PQE
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Our franchise agreement is due in November, but we don't want to renew. W

Resolved Question:

Our franchise agreement is due for renewal in November, but we don't want to renew. We are in the process of trying to sell the business (goodwill) what are our options, does the franchise have an option to buy the goodwill from us as I'm sure they would not want to lose their customer base
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Can the goodwill that you are selling be seperated from the name? I do you have a customer list that can be disassociated from the franchise branding?
Customer: replied 1 year ago.
Hi, no they will remain with the branding
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Does the franchise agreement have any termination provisions? Kind regards AJ
Customer: replied 1 year ago.
The franchisor may terminate if there is a default, which there hasn't been. There is no equipment or premises to deal with just the goodwill. There is a clause which states that 'the franchisee is not entitled to any payment in respect of good nor except in the event of the termination of the agreement arising from the failure by either party to renew upon its expiry in respect of the provision of services to any customers
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. In order to take the benefit of the goodwill do you need to deliver a customer list to them?
Customer: replied 1 year ago.
Yes we can do although they will know all the customers via their system
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Based on the information you have given me, it seems like there is nothing you actually have to sell to them - they already own the goodwill and customer list. Have you over paid any part of the franchise fee or do you have any capital costs that could be refunded?
Customer: replied 1 year ago.
Hi I perhaps didn't explain the list, although they can see the list we bought the goodwill from the previous franchise owners, so we therefore own it?
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Is there an obligation in the Franchise Agreement for them to find a buyer for your franchise? Did the previous owner allow the franchise to expire or were they actually selling it?
Customer: replied 1 year ago.
The previous owners sold it. I can't find anything saying that they have an obligation to find a buyer in the agreement, although they have been in contact with potential buyers from people who have previously shown interest. We have also been actively marketing the business.
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Based on the wording you have provided, you can sell the Franchise as long as it is in force and the agreement allows you to. If you allow the Franchise to expire then you wont be able to sell it. That is the key distinction. If you do not want to renew, the best thing maybe to negotiate an early release so you do not have to pay Franchise fees until November? Are they paid monthly?
Customer: replied 1 year ago.
Yes they are, if we waited for it to expire would the franchise be obliged to buy the goodwill, there is nothing within the agreement one way or another, and can we set the price, obviously at a reasonable amount not over inflated!
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. If they are obliged to buy the goodwill is there a specific aspect of this I can assist you with? Do you want to discuss how to exit the agreement?
Customer: replied 1 year ago.
That's right we don't want to renew but if we can't find a buyer before the expiry date is the franchise obliged to buy the goodwill
Expert:  Alex J. replied 1 year ago.
Hi. Thank you. Can you post a copy of the agreement into this thread - I can review the relevant termination clause? Kind regards AJ
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Customer: replied 1 year ago.
I have not got an electronic copy so have scanned in the relevant termination part of the agreement