Minneapolis franchisee lawyer Ron Gardner answers the question if a franchisor has to renew a franchisee.
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Franchisees often believe that franchisors are required to renew them at the end of their term and in some instances, that is you’re in a state that says a franchisor can’t fail to renew a franchisee unless they have good cause that’s true. Unfortunately, about 35, 38, somewhere in there depending on how you read the statutes don’t have that provision and there are lots of franchisees in the United States who don’t have any inherit renewal rights contained in state law or statute. That being said, a lot of franchise agreements say that we are required, we, the franchisor, are required to renew you so long as the franchisee has done a certain number of things. Typically, it’s not been in default, made all the asset or facility upgrades that we require because you’ve been in business for 20 years and our look has changed but if you’ll spend the money to get up to date, if you’ll sign a release so we know that you’re not going to use us for something we did in the past, if you’ll sign our then current existing franchise agreement. If you’re willing to do all those things then we will renew you or we have to renew you. And oftentimes franchisor lawyers don’t read their own agreements. I can’t tell you the number of times I’ve had franchisor lawyers saying we’re not going to renew your client and I say, wait a second. I see this list of eight things it says if he does them you have to renew them, tell me which one he hasn’t done because he’s done all eight of these or he’s willing to do all eight. He’s willing to sign your current franchise agreement, he’s willing to sign your release, he’s willing to make the facilities upgrade, whatever it is. And so it may be that we can compel your franchisor to renew you even if the franchisor says we don’t want to.