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Sometimes, Breaking Up Is Hard to Do: Termination of a Franchise Relationship Requires Attention to State Law, Defenses, and Other Issues

By Joseph Schumacher and Kimberly S. Toomey
March 01, 2004

Like the end of any relationship, the termination of a franchise can be an ordeal. In some instances, franchisors may unwittingly complicate the process by failing to safeguard their own rights or by violating statutory protections afforded to the franchisee. In franchising, the best-laid plans for termination are laid early and consider issues related to franchise law and litigation.

These issues include the franchisor's right to terminate, evidence supporting this right, franchisee defenses and affirmative claims and any applicable franchise-relationship statutes.

In addition, franchisors need to consider their own rights and determine how to proceed against the terminated franchisee ' whether to sue, exercise leasehold rights, or allow the franchisee to slip quietly into bankruptcy. Setting the franchisor's goals and outlining the legal framework for achieving those goals are important steps in creating a successful termination strategy.

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