What Happens When My Franchise Agreement Terminates?

A Video FAQ with Mark A. Williams.

When your franchise agreement terminates you have to stop doing business. That is the first and foremost thing. Whatever the brand or system that came with that franchise, you need to stop doing it. If you continue doing it there are a whole host of claims the franchisor can make against  you.

Secondly, you are probably going to be subject to a non-compete as a part of your franchise agreement, and that means not only do you have to stop doing business the way that the franchisor wanted you to, you might have to stop doing business completely in that industry.

It is really important to read your franchise agreement and make sure you understand exactly what obligations you have once you stop doing business.

© 2014 Parsonage Vandenack Williams LLC

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What Are Some Advantages and Disadvantages to Franchising?

A Video FAQ with Mark A. Williams.

There are a lot of advantages and disadvantages to franchising. Some of the advantages include that you are buying a box, something that has already been proven–a strategy, a brand, a system. You can buy into a franchise with little or no experience in that area and have a successful business because you are trading on the brand that has already been created. Now, because of that the franchisor wants some things from you. They are going to want a fee up front, they are going to want royalty payments, they are going to restrict you to only operating the business the way that they want you to. There is usually very little flexibility to go outside of their system or even to sell other products or services on the side. Once your franchise is over, once it is terminated, you usually have to stop doing that business. So once you get into a franchise, you usually have to think about staying in it for the rest of your career or selling the business.

© 2014 Parsonage Vandenack Williams LLC

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Should I Sell My Business to an Employee or Heir?


That is certainly a difficult question because you probably have an emotional attachment to these people and would like to sell it, but you, first of all, have to establish whether or not they are capable of running the business. The second most important aspect, if you care about the business and the people, is making sure that the staff that is there will continue in your absence. Frequently when you sell to an employee or to an heir you find out that you can’t, perhaps, charge the full amount for the business that you think it would bring from others. There are ways to do it with employees through ESOPs and through redemption agreements that can ease the pain of the cost of taking over the business.

© 2014 Parsonage Vandenack Williams LLC

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What Should Be Included in My Business Exit Strategy?

The first thing you should consider in your exit strategy is the timeframe: when are you wanting to exit the business? The more time that you have to plan that exit, the more opportunities you are going to have to create. The next things you want to consider are who your potential buyers are and what type of value your business has. Each industry has a way of evaluating the business and you need to know what your industry evaluation strategy is so that you can maximize your business during the time before you exit so that when you do exit, you are able to get the best dollars for your efforts over the years.

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us