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When it comes to renewing my franchise agreement, could the terms change?
Almost certainly yes. The ability of the franchisor to change the terms of the franchise agreement on renewal will depend on the wording in your franchise agreement, but certainly what you would expect the franchise agreement to provide is that if a franchisee wants to renew then certain conditions have to be satisfied - and one of those conditions would be that the franchisee has to enter into a new franchise agreement. Usually this provision requires a franchisee to enter into ‘the franchisor’s then current franchise agreement’. This means the franchisor could very substantially change the terms of the agreement.The ability of a franchisor to change the terms of the franchise agreement does make franchisees nervous. It may be possible for franchisees to obtain ‘comfort’ from a franchisor before they enter into the franchise agreement that the financial terms will not change, but in practice very few franchisors are prepared to provide this.The real protection a franchisee has is that the franchisor can only impose, on renewal, its then current franchise terms. In other words, the franchisor can’t impose terms it is not generally offering to other franchisees at the time. The second protection for franchisees is that it would be unlikely a court would allow a franchisor to change the terms so radically that it was a different type of franchise, or that it was no longer commercially viable for a franchisee to operate the franchise successfully.
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