Franchises can be great opportunities for individuals who want to own their own businesses but want to start out with a product or service that already has name recognition and an organizational network in place. Franchising executives take steps to make sure candidates are members in good standing in the community and will make a success of their endeavors. Sometimes the business arrangement doesn't work out. A franchise termination Illinois business owners sometimes face can come for a number of reasons.
Most states allow franchises to terminate a relationship for what is known as good cause. The cause usually refers to a breach in the contract between a franchisor and a franchisee. Contracts normally cover a wide range of offenses that can result in a cessation of the business. A number of them involve damaging the franchisor's reputation. A owner who pleads no contest or gets convicted of a felony is a good example.
If for some reason an owner is caught selling fraudulent or competing merchandise using the franchised trademark, the owner may be terminated. The language prohibiting this must be included in the signed agreement however. There have been cases where this prohibition was not included in the contract, and a court decided that the owner was within his rights.
Failing to maintain company standards is another cause for terminating an owner. These kinds of cases have involved companies being cited for a lack of service, quality, and cleanliness. In some cases franchisees have been terminated because they didn't run their businesses in a reliable fashion. Terminations have been upheld for things like a franchisee failing to renew a lease agreement, which ended up costing the franchisor exorbitant and unnecessary rental fees.
Owners of franchises go into their businesses knowing there are sales expectations involved. If they fail to meet those expectations, termination can follow. The sales goals must be reasonable, but if they are, and the franchisee is unprofitable, the franchisor will have a case. In the case of a franchisee becoming insolvent or not including an entire territory in the sales effort, the franchisor can sue for cessation.
Franchisors must follow procedures, according to state law, when they attempt to terminate a franchisee. Franchisees have to receive official notice of the termination in advance. A notice is required to list all the reasons for the cessation. It must let the franchisee know exactly when it goes into effect and how much time is being allowed for the owner to correct the issues that caused the breach.
When a breach is incurable, a franchisor may terminate immediately. Otherwise, the head office is required to give the franchisee sufficient time to correct the cited deficiencies. Not giving the franchisee an adequate time frame could result in the court enjoining the business cessation.
Franchises can be great opportunities for hard working and ambitious entrepreneurs. It is not independent ownership though. Owners are contractually obligated to adhere to the standards and practices dictated by the franchisor. Failure to do this leads to terminations.
Most states allow franchises to terminate a relationship for what is known as good cause. The cause usually refers to a breach in the contract between a franchisor and a franchisee. Contracts normally cover a wide range of offenses that can result in a cessation of the business. A number of them involve damaging the franchisor's reputation. A owner who pleads no contest or gets convicted of a felony is a good example.
If for some reason an owner is caught selling fraudulent or competing merchandise using the franchised trademark, the owner may be terminated. The language prohibiting this must be included in the signed agreement however. There have been cases where this prohibition was not included in the contract, and a court decided that the owner was within his rights.
Failing to maintain company standards is another cause for terminating an owner. These kinds of cases have involved companies being cited for a lack of service, quality, and cleanliness. In some cases franchisees have been terminated because they didn't run their businesses in a reliable fashion. Terminations have been upheld for things like a franchisee failing to renew a lease agreement, which ended up costing the franchisor exorbitant and unnecessary rental fees.
Owners of franchises go into their businesses knowing there are sales expectations involved. If they fail to meet those expectations, termination can follow. The sales goals must be reasonable, but if they are, and the franchisee is unprofitable, the franchisor will have a case. In the case of a franchisee becoming insolvent or not including an entire territory in the sales effort, the franchisor can sue for cessation.
Franchisors must follow procedures, according to state law, when they attempt to terminate a franchisee. Franchisees have to receive official notice of the termination in advance. A notice is required to list all the reasons for the cessation. It must let the franchisee know exactly when it goes into effect and how much time is being allowed for the owner to correct the issues that caused the breach.
When a breach is incurable, a franchisor may terminate immediately. Otherwise, the head office is required to give the franchisee sufficient time to correct the cited deficiencies. Not giving the franchisee an adequate time frame could result in the court enjoining the business cessation.
Franchises can be great opportunities for hard working and ambitious entrepreneurs. It is not independent ownership though. Owners are contractually obligated to adhere to the standards and practices dictated by the franchisor. Failure to do this leads to terminations.
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