The Franchise Duration Clause

Included in every franchise agreement is the franchise duration clause which states the time and terms when a franchisor can re-acquire your business. It is only natural to think that your business will grow over time and that your children will someday inherit it or that you will sell the business and retire, but that may not be the case. Most franchise agreements contain a clause called the “franchise duration” which could be as little as 5 years or as many as 30 years in the future, at which time the ownership of the business may revert back to the franchisor. You could work for 10, 20, or 30 years, break your back to build a business only to find that it can be snatched right out from under you legally. When you question a franchisor about the franchise duration they are sure to say that it is rarely enforced, but that verbal assurance will carry little weight over a written contract should you go to court, which may not even be an option because the franchise agreement also could contain a dispute resolutions clause which could force you to enter into mediation and binding arbitration. The franchise duration clause needs to be dissected and firmly understood by the franchisee before signing anything or paying money.

It takes the experience, skill, and expertise of a knowledgeable franchise attorney to make certain that the legal language of the franchise duration clause doesn’t trap you in an untenable situation down the road. Many franchisors use the franchise duration clause to require and franchise successful businesses, so don’t think they are ethically above such behavior. Business is business. Mario L. Herman is a franchise attorney that can protect you from signing a binding contract that can be detrimental to your long-term best interests. Don’t be swayed by verbal promises as they mean nothing when push comes to shove and you want to sell your business and retire, or transfer your business to your children.