Answers

Q: I have not had the expected degree of success that I had hoped for with the franchise I have been with for a year. I now want out - what are the legal implications for this?

John Pratt: Franchising can be hard work and instant success is not guaranteed. Virtually all franchise agreements last for at least five years and don't give franchisees the right to walk away. The reason for this is that franchisors will have invested a considerable amount of time and effort in to granting a franchise and they do want franchisees to commit to putting in the time and effort required to make the franchise work.

In this case, the franchisee has been operating for a year, which really isn't long enough to make a decision about the franchise unless it is clear that there is a fundamental flaw in the franchise operation which affects all franchisees - whilst this can happen it is unusual.

The first bit of advice is that you should stick at it. Ask the franchisor for assistance, explain the issues and try to turn the business round. This is necessary because if you do not have a successful business, then your best option is to sell it, yet this isn't viable on the basis that people will question your reasons for selling and understandably nobody will take on a failing business.

If you are not in a position to sell your business, then unless you have a very unusual franchise agreement you cannot terminate before the expiry date and, if you do, you will be in breach of contract. This means that if you were to terminate the franchisor could sue you for the loss of profits that it would have earned had you continued to be a franchisee. This could be a substantial sum.

Whilst most franchisors would prefer to reach an amicable settlement with an unhappy franchisee, discussions with the franchisor in such circumstances are usually on the basis that the franchisee is in a weak position. As a result, your aim should be to try to make your business as successful as possible and if you have decided that it really isn't for you, to put it in a position where you can sell it.