Before an agreement expires, a franchisor can terminate it in the following circumstances:

• where the franchisee has breached the agreement
• where the agreement provides a right to terminate even though the franchisee has not breached it or
• where special circumstances apply.

Breach by franchisee

Unless special circumstances apply, a franchisor seeking to terminate the franchise agreement because of a breach by the franchisee must do the following:

• give the franchisee reasonable notice that the franchisor proposes to terminate the agreement because of the breach
• tell the franchisee what it needs to do to remedy the breach
• allow the franchisee a reasonable time (up to 30 days) to remedy the breach.

If the breach is remedied within the prescribed timeframe, the franchisor cannot terminate the franchise agreement because of that breach.

No breach by the franchisee

A franchise agreement may also give the franchisor the right to terminate the agreement before it expires, even though the franchisee has not breached the agreement or consented to the termination.

A franchisor intending to terminate an agreement on this basis must give the franchisee reasonable notice of the proposed termination and the reasons for it. What constitutes reasonable notice will depend on the circumstances.

Special circumstances

The code sets out specific circumstances in which the franchisor is not required to provide the franchisee with the opportunity to remedy the breach or provide reasonable written notice before terminating the franchise agreement, including where the franchisee:

• no longer holds a license that the franchisee must hold to carry on the franchised business
• becomes bankrupt, insolvent under administration or an externally-administered body corporate
• voluntarily abandons the franchised business or the franchise relationship
• is convicted of a serious offence
• operates the franchise in a way that endangers public health or safety
• is fraudulent in connection with operation of the franchised business
• agrees to the termination of the franchise agreement.

Either party can choose to use the dispute resolution procedure in the Code for disputes arising from termination due to a breach by the franchisee or in accordance with the agreement.