When purchasing a franchise in Massachusetts, an individual must abide by an agreement outlining the ownership rules and requirements set by the franchisor. The company providing a franchisee with a license to operate under its trademark may terminate the agreement if a breach occurs.
Contracts generally require franchisees to operate their businesses within predefined standards that reflect the franchise. Breaching the terms could result in a company rescinding the franchise license and forcing a business owner to shut down. Common examples of a breach include failing to maintain the premises, mistreating customers and poor financial management.
Franchisor sued to terminate an agreement
The owners of a Boston donut and coffee shop operating under a popular franchise license found themselves faced with a lawsuit alleging a breach of their agreement. The franchisor requested that the court permanently close their business due to complaints of health, sanitation and food safety standards violations.
After a customer’s video went “viral” over the internet, the franchisor no longer wanted its brand and reputation associated with the location. As reported by Boston magazine, a major news station showed the customer’s footage, which allegedly resulted in negative media coverage.
The franchisor sent investigators to determine if the video footage was accurate. Upon discovering the truthfulness of the video, the company sent the location a “notice of default” stating it had breached the terms of its franchise agreement. If the owner could not resolve the issues captured in the video within 24 hours, the company would order it to close its doors. Because the shop owner reportedly did not comply with the default notice and continued to operate, the company filed a legal action.
A franchisee may also terminate a contract
A franchisor typically provides a new owner with training and guidance in operating a franchise in adherence to the contract’s specified standards. A franchisee, however, may file a legal action to terminate an agreement if he or she relied upon false or misleading statements to purchase a unit. If an agreement contains requirements that would cause undue harm or damages, a franchisee may have a right to terminate it.