Entering a franchise arrangement can be an exciting venture, offering a blend of entrepreneurial independence and the support of an established brand. However, circumstances change, and there might come a time when you need to exit your franchise agreement. Understanding your franchisee rights and the termination process is crucial in such situations. Let’s dive into the complexities of franchise contracts and explore how to navigate the exit path.

Understanding Your Franchise Agreement

A franchise agreement is a legally binding contract between a franchisor and franchisee, specifying the terms of the franchise arrangement. It’s essential to know what is included in a franchise agreement. Typically, these documents cover the term (time period) of the franchise agreement, which is limited to a specific period (5, 20 or more years), the commercial terms, and the obligations and rights of both parties. It is highly recommended that you seek legal counsel with experience in franchise law to help you navigate the franchise agreement.

When Franchises Fail

Not all franchise ventures succeed. Failed franchises are a reality, and knowing how to handle this situation is vital to limiting your liability. The first step is consulting a franchise lawyer, who can guide you through the franchise termination process. Do not wait until the Franchisor serves you with a default notice. Oftentimes, waiting only makes the situation worse and may limit your options.  

The Termination Process

Exiting a franchise requires adhering to the termination process outlined in your agreement. This often involves providing written notice and may include a franchise termination letter. Early termination of a franchise agreement may be a complex process, especially if it involves a material breach or if the franchise agreement is terminated before the end of its term.

The Importance of Written Notice

Providing written notice is a standard requirement in franchise agreements. This formal step is essential in the termination process and must be handled with care to ensure compliance with the agreement’s terms. Your franchise lawyer will help you with your written notice. Certain states require the franchisor to serve written notice on the breaching franchisee and allow a specified period of time to cure the default (in New Jersey, the law requires a 60-day notice).

Seek Legal Advice

A franchise lawyer can be invaluable in these difficult situations. They assist you to understand the terms of your franchise agreement, including the termination clause and dispute resolution provisions, and guide you through the legal intricacies of ending your franchise relationship. The attorney will also advise you of any defenses – or even affirmative claims – that you may have to counter the Franchisor’s termination action. 

Is It Possible to Exit Early?

Early termination of a franchise agreement is possible but can be very challenging. It often depends on the specific terms of your agreement and the nature of your franchise arrangement. 

Another exit strategy is to find a buyer for your franchise unit, which sale the Franchisor will have to approve. Understand, a Franchisor by law must disclose terminations in its Franchise Disclosure Document over several years. Terminations do not encourage more franchise investors, so a transfer to a new Franchisee looks much better to potential investors. Therefore, do not assume that the Franchisor is eager to terminate. There is usually negotiating room to limit your losses – so long as you are prompt in addressing the situation.


Exiting a franchise agreement can be more complex than entering one. Whether you’re dealing with a failed franchise or simply looking to move on, understanding your contract rights and obligations is crucial. Remember, consulting with a franchise lawyer can provide clarity and guidance, thus helping you navigate the exit process with confidence.

Exiting a franchise agreement can be a daunting task. With the right knowledge and legal support, you can navigate this process smoothly and move on to your next venture. Remember, every end is a new beginning!

If you are looking for a smooth exit from your current franchise investment, don’t hesitate to call.

© Kilcommons Law, P.C. 2024