Have No Fear

The End Is Near

Ironically, the termination section of a franchise agreement is endless. It rattles on ad nauseum, listing dozens of situations in which the franchisor may terminate the relationship--and often not one instance in which franchisees may do so. Franchisors generally have only one enforcement tool: the threat of termination. They describe it at length, but use it gingerly.

The agreement enables franchisors to protect their trademarks, systems and other intellectual property if franchisees abuse, misuse or misappropriate any portion of the franchise. This section also allows the franchisor to protect other franchisees. If a franchisee in your small town is running a slovenly, rat-infested operation, your business will suffer, too. You operate under the same trademark as many other franchisees whose businesses are indistinguishable from yours in the eyes of customers. You may dislike the overbearing language of the franchise agreement, but you'll be the first to insist that the franchisor enforce its standards against owners who are slacking on the job and casting your business in a negative light.

The franchise laws of about 16 states and the District of Columbia allow for termination or nonrenewal only where the franchisor has "good cause." These statutes apply if you get into a tangle with the franchisor and are notified that the franchise agreement is canceled.

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This article was originally published in the December 1998 print edition of Entrepreneur with the headline: Have No Fear.

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