Is there a maximum number of times a franchise agreement can be renewed?
answered by John PrattSenior Partner at Hamilton Pratt
Generally, franchisors don’t grant perpetual renewals. The reason most franchisors don’t is that it can be difficult for a franchisor to terminate a franchise agreement or have sufficient grounds to refuse an automatic renewal under a renewal clause in a franchise agreement, even if a franchisee is performing badly.
Renewal clauses contain conditions that have to be satisfied if a franchisee is to receive a renewal, but those conditions are sometimes subjective and, as a result, there may be uncertainty as to whether the franchisor is entitled to terminate. Where there is uncertainty, issues can end up in court.
In view of the above, franchisors prefer a situation where after a fixed number of renewals, there is no contractual right in favour of a franchisee to renew. That has the advantage of being clear cut. However, a franchisor could renew the franchise agreement, even though it’s not obliged to do so.
Generally, in a five-year term you would expect two automatic renewals, in a 10-year term one automatic renewal and, in the case of the much rarer 25-year terms, you would not expect any renewal.
John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.
- Are exclusive franchise territories preferable to ones with no limits?
- Will I be penalised if I quit a franchise before the end of the agreement?
- What does the initial franchise fee typically buy you?
- What advice can I expect from a solicitor during negotiations with a franchisor?
- What marketing support is given to franchisees by the franchisor?
Want to be your own boss? Start today!
Relooking is a beauty franchise, offering a variety of skin care and anti-aging treatments... find out more£18,000 Minimum Investment
Sweets and Treats Vending is a confectionery distribution franchise company... find out more£9,950 Minimum Investment
SuperGreen Solutions is an advisor, supplier, and installer of energy-efficient solutions to… find out more£178,000 Minimum Investment
Wikane is a business development franchise, specialising in working with SMEs to help them… find out more£38,000 Minimum Investment
Enquire now from
You have pending
Here's just five reasons why you should join our FREE newsletter!
New articles added every week
Hand picked franchise opportunities just for you
First class help and advice for franchising and business
We have the industries best contributors on board
Inspiring and insightful franchise case studies