As a franchisee, you must do everything in your power to maintain a strong working relationship with a franchisor. If not, you may risk losing your business altogether. Continue reading to learn what happens if you breach your franchise agreement and how one of the experienced franchise law attorneys at FortmanSpann, LLC can help you avoid this.
What is a curable versus incurable breach of a franchise agreement?
First of all, a breach of a franchise agreement occurs when a franchisee fails to perform the responsibilities that are promised upon signing the contract or otherwise takes actions that the contract explicitly does not permit. In this case, a franchisee may be obligated to pay a franchisor financial compensation, as per the liquidated damages clause in their contract. Such liquidated damages may include fees, royalties, or otherwise the loss of the right to operate.
And so, a curable breach is one in which the franchisor provides the franchisee with a notice of default. With this notice, a franchisee is given a certain amount of time to cure what they have allegedly done wrong. This is when a franchise agreement can remain intact.
On the other hand, an incurable breach is one in which the franchisor claims that the alleged wrongdoing is so significant that a franchisee cannot do anything to fix it. Instead, the franchisor will automatically terminate the franchise agreement.
What will happen if there is a curable breach versus an incurable breach?
First of all, if you are facing a curable breach of your franchise agreement, you must respond to the notice of default immediately. Failure to do so will mean that your once curable breach is now incurable. So, upon receiving this notice, you must retain the services of a skilled franchise law attorney who will understand how to preserve your legal rights over your franchise and how to challenge this claim.
In addition to not responding to this notice of default, the following actions may lead to an incurable breach of your franchise agreement:
- Failing to cure your alleged wrongdoings in the operation of your franchise.
- Suspending the operation of your franchise without the consent of the franchisor.
- Transferring the operation of your franchise to another party without the consent of the franchisor.
- Filing for bankruptcy for your franchise.
- Becoming unable to pay for your franchise’s bills.
- Being convicted in a criminal proceeding.
With all that being said, if you believe that a franchisor is making a false claim against you, then you must consult with our firm as soon as possible. We look forward to speaking with you.