Renewal is at the heart of the value of franchise activity. Thus, a franchisee should have the right to resell towards the end of its last term and the franchisor should be prepared to grant the purchaser a new five-year term, otherwise the value of the transaction will be significantly reduced if, for example, the buyer can only have the balance (perhaps one year) of the outgoing franchisee`s mandate. Make sure you are aware of all the fees incurred and because of the franchisor when you exercise your option, or discuss an extension of your deductible. Whether you or your franchisor has the right to terminate your contract and under what circumstances, the terms of the contract are generally determined. However, when a franchisor offers to terminate a contract before expiry, it must follow code procedures (for example. B provide for appropriate notification), unless special circumstances apply. The code requires both parties to act in good faith, including negotiations that will be conducted during the duration of the agreement, as well as negotiations on renewal and withdrawal agreements. Strictly speaking, the requirement does not apply where the franchisee has an extension option, although it is certainly good practice for franchisors to issue that notification when a clause expires, particularly in cases where the franchisee does not meet or does not meet the requirements for the extension at the time the deadline is reached. This makes the opinion an important planning tool for both parties of the franchise agreement – it can be the driving force behind discussions between the parties regarding their options. There are often a number of factors in the game when the process approaches (including leasing), so the sooner they are considered the better. In the event of a renewal or renewal of a franchise agreement, the code requires the franchisor to provide the franchisee with the most recent version of its disclosure document within four months of the end of the fiscal year, at least 14 days before renewal or renewal.
While this provision is not new, it has recently attracted attention. In April 2020, the famous Bob Jane T-Mart franchise system committed to the ACCC, which acknowledged that it had likely violated section 18 of the code. This admission refers to some of the network who had entered into fixed-term contracts, unlike others, whose contracts are in progress and without an expiry date.