The franchisor compliance manual

End of the term

The Code does not require that you extend a franchise agreement or enter into a new agreement once the term of the agreement ends. However, as mentioned previously, you must notify the franchisee in writing whether you intend to extend the term or enter into a new agreement with the franchisee.

Restraints of trade

If the franchisee seeks to extend the agreement and you decide against the extension, the Code may provide protection to the franchisee if you later attempt to enforce a restraint of trade clause against them.

The protection will only apply if:

  • the franchisee had indicated, in writing, that it wanted to extend the agreement on substantially the same terms as those contained in your current franchise agreement
  • the franchisee was not in breach of the agreement at the time it expired
  • the franchisee had not infringed upon your intellectual property, or breached its confidentiality agreement with you, during the term of the agreement, and either:
    • the franchisee claimed compensation for goodwill because the agreement was not extended, but the compensation given was merely a nominal amount and did not provide genuine compensation for goodwill or
    • the agreement did not allow the franchisee to claim compensation for goodwill in the event that it was not extended.

Whether the compensation offered is genuine will depend on the circumstances.

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