The franchisor compliance manual

Termination

The Code does not provide you with a right to terminate a franchise agreement. Whether you have the right to terminate an agreement, and in which circumstances, will normally be determined by the terms of your franchise agreement.

What the Code does is require you to follow certain processes if you propose to terminate a franchise agreement.

Breach by franchisee

If you propose to terminate a franchise agreement because the franchisee has breached the agreement, you must first give the franchisee reasonable written notice of your intention to terminate the agreement because of the breach. You must also notify the franchisee of what they must do to remedy the breach and allow them a reasonable time to remedy the breach (you are not required to allow more than 30 days).

If the franchisee remedies the breach in the allotted time frame, you cannot then terminate because of that breach.

If a dispute arises in relation to a proposed or actual termination, the dispute resolution framework outlined in Part 4 of the Code will apply, see Dealing with disputes.

No breach by franchisee

Under the terms of your franchise agreement, you may have the right to terminate an agreement before it expires, even if the franchisee has not breached the agreement or consented to the termination.

In these circumstances, you must give the franchisee reasonable written notice of the proposed termination and the reasons for it.

If a dispute arises in relation to a proposed or actual termination, the dispute resolution framework outlined in Part 4 of the Code will apply, see Dealing with disputes.

Special circumstances

You do not have to comply with the termination procedures outlined above if you intend to terminate a franchise for one of the following reasons (and your franchise agreement allows you to terminate the franchisee for that reason):

  • no longer holding a licence needed to carry on the business
  • becoming bankrupt, insolvent under administration or externally-administered
  • becoming de-registered (if they are a company)
  • abandoning the franchise or franchise relationship
  • being convicted of a serious offence
  • operating the business in a way that endangers public health or safety
  • fraudulently operating the business.

You also do not have to comply with the termination procedures if you and the franchisee mutually agree to terminate the franchise agreement.

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