Once your franchisee has signed the franchise agreement, you may be under the impression that they will obey the terms and obligations outlined therein no matter what. Unfortunately, franchisee noncompliance issues are more common than many franchisors expect. When a franchisee fails to comply with legal and contractual requirements, it not only can have a negative impact on other franchisees in the system, but it can disrupt the entire system. If your franchisee is not meeting operating standards or financial obligations, franchise attorney Harold Kestenbaum recommends that you take these steps to remedy the situation:
Go Over the Contract
Franchisee noncompliance is sometimes a result of a simple misunderstanding of the obligations outlined in the franchise agreement. Communication is key; as soon as the franchisee’s noncompliant behavior is detected, notify them of the issue. Then, go over the franchise agreement with them and ensure that they understand the terms and obligations that they are failing to meet. It may happen that the franchisee was unaware of the violation being committed, in which case notifying them of the violation will serve to solve the problem. It is a safe bet that your franchisee has never read the franchise agreement, nor do they have any idea what their legal obligations are.
Issue a Warning
If the franchisee understands that they are violating their contract and still persists in their noncompliance, give them an informal warning before taking the next step of a formal notice to cure. This will help to maintain a good relationship in the case that the franchisee heeds the warning and decides to cure their defaults or rectify their conduct. The franchisee may be experiencing difficulties in fulfilling their contractual obligations, in which case it may be possible to work with them in order to develop an acceptable solution. Keep in mind that this solution may not happen overnight.
Contact a Franchise Attorney
If your warning has gone entirely unheeded, it is time to bring an attorney into the conflict. Many complex legal issues come into play when a franchisor decides to declare a default, terminate a franchise agreement, sue a franchisee, or seek a preliminary injunction, so it is essential to have an experienced franchise attorney like Harold Kestenbaum on the scene. The right attorney will take into account important legal considerations and help determine the proper proceedings. If a legal action such as franchise termination is taken improperly, there is a good chance it will end up being much more messy and expensive than if it had been handled by a competent franchise attorney, so it is crucial to have a professional to guide you through the process.
Harold Kestenbaum has specialized in franchise law since 1977. If you have any questions on franchising or if you need a attorney who can help you secure justice in any noncompliance situation, contact us for a free franchise consultation.