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Do all franchise agreements offer an automatic right to renew?
Franchise agreements generally offer the franchisee a right to renew, but this right is not automatic, as any renewal right is usually subject to the franchisee satisfying certain conditions.Some franchise agreements may include the right to renew only once and others may allow renewal more than once. Many franchisors grant a five-year term with a right of renewal. Some franchisors grant lengthy terms - for example, 20 years - with no rights of renewal. In such cases, the franchisor may well offer a new franchise agreement at the end of the 20-year term, but will be under no obligation to do so. In order to find out the rights of renewal granted and the conditions that need to be satisfied for renewal to take place, you will need to check the franchise agreement for the franchise in question.Conditions for renewal may include all or some of the following: the franchisee having to pay a renewal fee; there being no material breaches of the agreement by the franchisee; the franchisee and their staff attending any necessary refresher training; the franchisee agreeing to refurbish the premises or re-equipping the franchise business to meet the franchisor’s latest standards; the franchisee giving up any claims it may have against the franchisor from the initial term of the franchise agreement; and the franchisee having performed their obligations to the reasonable satisfaction of the franchisor.If the conditions are satisfied, the franchisee will normally be required to renew on the then current franchise agreement used by the franchisor.
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