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How often can a franchise agreement be renewed?
It depends on what the franchise agreement says. Most agreements in the UK are granted for five years. You would expect these agreements to be renewable at least twice, so that a franchisee is ‘guaranteed’ a 15-year term.Of course, there are conditions attached to any such renewal. Usually these conditions are that the franchisee must have performed to the satisfaction of the franchisor, not be in breach of the franchise agreement at the time of renewal and not have committed such a serious breach of the franchise agreement that the franchisor would have terminated. In addition, the renewing franchisee would have to enter into the franchisor’s then current franchise agreement, which could be very different to the agreement the franchisee wants to renew.The British Franchise Association likes to see at least two guaranteed renewals and also likes to see that on a transfer the incoming purchaser of the franchise business can also renew on two occasions.With a 10-year franchise term, you would expect one renewal in favour of the franchisee. For longer terms, such as the lengthy terms granted in relation to some fast food franchises, which require substantial upfront shop fitting expenditure, franchisees would not generally have a right to renew.Having said all of the above, if a franchisee is performing well franchisors are likely to renew even when under no obligation to do so.
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Companies to Consider
Operational breakeven in the first month of trading and return on capital investment from approx.18 months
In excess of £70,000
Assists in securing third party funding
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