Thinking About Ending Your Franchise Agreement? Try This First

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Ending Franchise Agreements

Leaving a franchise can be tricky, so it’s a good idea to think about how you can resolve common pain points. If you’re thinking about ending your franchise agreement, before you bid farewell for good, why not try these 6 things first?

Maybe ending your franchise agreement is on the cards. Did the franchise opportunity not deliver like you thought it would? Would you like to move to a different franchise territory but can’t transfer to the one you want under your current franchise agreement? Or maybe it’s taken much longer to break even than what the franchisor promised?

There are quite a few reasons why you might want to break from your franchise agreement aside from your franchise simply struggling. And, because of your individual circumstances you might find that you really have no other option than to say goodbye. But to make sure you don’t have any regrets further down the line, it’s certainly worth considering other options before taking this often costly and time-consuming step.

1. Reignite your passion

Feel like you’ve fallen out of love with your franchise? You might be able to rekindle that fire again by changing your mindset. Ask yourself why you are doing it, what’s the most important aspect of it and if you are helping to improve other people’s lives.

By taking the time to pause and remind yourself of what your purpose is, rather than getting bogged down by the daily routine, you might feel re-energised and in a better mindset to do all you can to make it work.

As part of this process you might also find it helpful to declutter your head and delegate some of your mound of tasks to your trustworthy employees.

2. Communicate your reasons for leaving with the franchisor

If you’ve had a good relationship with the franchisor and your reason for leaving has nothing to do with them, you can talk openly about your reasons for wanting to walk away. You might be pleasantly surprised by what they can offer you. For instance, if you are wanting to terminate your franchise agreement in order to operate in another area, you and your franchisor might be able to come to an arrangement to make this a reality.

The franchisor might also be able to waive royalties for a certain period of time, provide extra training or make helpful suggestions about how you can improve particularly troublesome areas of your franchise.

At the end of the day, a good franchisor wants to help you succeed as much as possible, as it helps with the overall franchise sales and strengthens the brand. What’s more, if a franchise fails and closes, it has to be disclosed in the FDD. No franchisor will not want to do that unless they have no other option.

3. Have a chat with your landlord

If you’re thinking about ending your franchise agreement because you are struggling financially, landlords can sometimes work cooperatively with franchisees and reduce rent for a period of time. This rent will often have to be made up by the end of the term, but it might help you get back on your feet in the meantime while you make plans of how your franchise can bounce back.

4. Work through disagreements with the franchisor

This might not always be possible. But if you want to end your franchise agreement because you’re not seeing eye-to-eye with your franchisor, make sure you’ve tried everything you can to resolve the conflict. Reflect on the situation, chat it through with people you trust and a franchise lawyer and consider if there is a realistic way to find a solution. However, if you feel like you have been misled by the franchisor or there are fundamental, irreconcilable differences between you, it is probably the best decision to find a way out.


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5. Get legal advice

If you’re thinking about terminating your franchise agreement, it’s crucial to get in touch with a franchise lawyer first. To understand what to expect when you get the ball rolling, you need to review the contract and find out what you signed up for. There are lots of experts out there that help people through this situation on a regular basis. It’s imperative to discuss your thoughts and goals with a specialist to come out with the best result you can.

6. Don’t take the decision lightly

When you signed the franchise agreement you will have committed to the business for a fixed term. By choosing to walk away early, it’s most likely that you’re going to have to face the financial consequences. The franchisor will want compensation equivalent to the franchise fees it would have earned if you had continued for the full term.

Don’t worry - the franchisor is legally obliged to limit these losses or re-sell the territory to a new franchisee as quickly as possible. However, don’t underestimate that there can be a significant financial impact, so always consult a franchise lawyer before you make any hasty decisions.

Light at the end of the tunnel

No matter what your reasons are for considering leaving your franchise agreement, we recommend that you take these six tips on board first. Walking away from a franchise without carefully considering your options and your position is a bad move. But it’s not all doom and gloom. Clouds do have silver linings, and if done right, good can come from the situation.

If you come to a decent settlement with the franchisor, it can actually lead to a far better outcome than if you’d stuck with the franchise and been unhappy for more years to come. It can also be mutually beneficial for the franchisor as they no longer have the risk of a disenchanted franchisee in their franchise network. They can then benefit from having someone who is better suited to the position on board.

If you’ve been won over by the franchise model and want to explore other businesses, you might want to check our UK franchise directory for the latest opportunities.

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