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How much would it cost to get out of a franchise agreement?
A great majority of franchise agreements in the UK last for between five and 10 years. Franchisees are committed for this period and do not have the ability to terminate the franchise agreement. The reason for this is that franchisors need to make sure that franchisees are committed to the franchise business. The franchise agreement will contain detailed and tough provisions which enable the franchisor to terminate if the franchisee is in breach. There will be no such provisions in favour of the franchisee who could, nevertheless, still be able to terminate the agreement if the franchisor committed very serious breaches of the franchise agreement. This is because there is a rule of common law that if one party to a contract commits breaches which go to the root of the contract then the innocent party can terminate. If a franchisee wished to walk away then they would be in breach of contract and the franchisor could terminate the agreement and sue the franchisee to recover the loss which the franchisor will incur. Normally this loss is calculated by multiplying the continuing fees that a franchisee would pay in each year of the agreement, multiplied by the remaining years of the franchise agreement, less about 50 per cent.
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