Ending a franchise agreement takes planning and following the rules. Franchisors must follow specific steps to comply with state laws, including Indiana’s, to avoid problems.
Check the franchise agreement
The franchise agreement explains when and how termination can happen. Common reasons include not paying fees, failing to meet standards, or breaking the contract. Indiana follows the Federal Trade Commission (FTC) Franchise Rule, which requires clear details about termination rights. Franchisors should make sure they have a valid reason before moving forward.
Give proper notice
Most franchise agreements specify how and when to give notice of termination. Indiana law does not set a specific notice period, but agreements often require written notice within a certain time. Proper notice helps franchisors avoid legal issues and allows franchisees to fix problems if necessary.
Keep records of violations
Keeping records of contract violations helps franchisors prove why they are ending the agreement. Missed payments, customer complaints, or failure to meet brand standards should be documented. Indiana courts often look at this evidence when deciding if the termination was fair.
Follow post-termination rules
After termination, franchisors should ensure that franchisees remove branding, return company materials, and follow non-compete rules. Indiana allows reasonable non-compete agreements to prevent former franchisees from starting a competing business immediately.
Avoid legal trouble
Wrongful termination claims can lead to expensive legal battles. Indiana courts check if the franchisor followed the contract and gave the franchisee a fair chance to fix issues. Following legal and contract rules reduces risk.
Ending a franchise agreement must be done carefully. Franchisors should stick to the contract and state laws to protect their business.