No franchisee wants to receive a default notice from their franchisor. However, when a default notice is issued, franchisees should not bury their heads and must pay careful attention. Even a minor violation notice can have serious consequences to franchisees. This is because most franchise agreements contain heavy potential penalties for repeat violators. Many franchise agreements have provisions that allow a franchisor to terminate a franchisee after a certain number of defaults, regardless of what those defaults are and regardless of whether the franchisee has fixed the problem. Many franchise agreements also take away certain rights, such as renewal rights and transfer rights, if there are defaults during the term of the agreement. Franchisees who are not aware of these provisions can find themselves in a precarious situation when they try to sell or renew.
Franchise agreements are typically similar in nature. However, one size does not fit all, and only a careful review of the agreement will reveal a franchisor’s rights. That’s not to say a franchisor will exercise those rights. But a franchisee who does not understand the ramifications of a simple default letter is at risk for an unpleasant surprise down the road.
If you have any questions about franchise law, please contact Brian Loffredo at
ABOUT BRIAN LOFFREDO
Brian is a commercial litigator with more than seventeen years of experience representing clients in the franchise industry. Brian routinely assists clients during the licensing and franchise/FDD review process, as well as with the resolution of franchise-related disputes, including those involving terminations, territorial disputes, fraud, disclosure/relationship law violations and breaches of contract.
In addition, Brian represents and counsels clients in the construction industry on matters involving litigation, construction defects, licensing and compliance, collections, mechanic’s liens, payment bond and Miller Act claims, contract drafting, and compliance with home improvement laws and other construction industry laws.
Brian also has extensive experience representing financial institutions with workouts, collections and residential / commercial foreclosures.
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