At West Coast Franchise Law, we help franchisees get their deals done. Sometimes that deal is the end of the deal – in other words, when it’s time to exit. A common question we receive is, “If I want to get out of this franchise agreement, what do I have to do? What’s it going to cost?” The answer, like many legal answers, is: “It depends.” While this response may seem frustrating, let’s delve into the factors that influence the cost and process of exiting a franchise agreement.
Key Considerations for Exiting a Franchise Agreement
- Misrepresentation or Deception: If you were misled or deceived when entering into your franchise agreement, and it hasn’t been long since you signed it, you might have a claim. In such cases, you should consult a franchise lawyer to discuss potential breaches by the franchisor and the possibility of making allegations based on the misinformation you received.
- Financial Performance: If your franchise isn’t making money and you’re incurring losses, this could also be a factor in your claim. However, if things simply haven’t gone well and you’ve been in the franchise for a short period, expect to pay something to exit.
- Franchise Agreement Terms: The terms of your franchise agreement significantly impact the cost of exiting. Some agreements include liquidated damages or require you to pay the full amount you would have owed for the remaining term. While it’s challenging for a franchisor to collect the entire amount if they’re no longer providing services or territory, they might seek the profit amount you would have generated.
- Negotiation and Litigation: Your ability to pay, the arguments you present for being released, and the potential costs of litigation are all factors to consider. Each case is unique, and assessing these elements helps determine your exit strategy.
The Process
When you reach out to us, we start by assessing the context and facts of your situation. Our goal is to help you exit for as little as possible, but this requires a detailed understanding of your specific circumstances. While there isn’t a one-size- fits-all answer, our approach involves:
- Contextual Assessment: We gather all relevant information about your situation.
- Evaluating Arguments: We evaluate any potential claims you might have against the franchisor.
- Cost Analysis: We consider the costs associated with negotiating or litigating your exit.
- Strategic Planning: We develop a strategy tailored to minimize your exit costs.
Exiting a franchise agreement can be complex, and the costs vary based on numerous factors. While the answer to “How much will it cost?” is case-by-case, our commitment at West Coast Franchise Law is to provide you with a clear understanding and to work towards the most cost-effective solution. If you’re considering exiting your franchise agreement, contact us for a personalized consultation.
