Franchise agreement early termination penalties

Sound_Pound

Hi all

I am currently 3 years into a 5 year franchise agreement. Due to a major change in my personal circumstances I am forced to consider early termination of my agreement.

I have been led to believe that the franchisor uses some type of Bfa formula to calculate the penalty fees that I would have to pay for early exit.

I don't have specific details but it entails at least the following criteria:-
* last 3 months turnover
* number of franchisees in the network
* number of months remaining on the agreement.

The problem is that I don't know how these (possibly other) criteria are used to calculate a settlement figure.

I would appreciate it if anybody familiar with this formula could let me know the details of precisely how this calculation is put together.

Thanks in advance

SP

paddyrg

I think you'll need to contact the franchisor, although there must be something in your franchise agreement?

Sound_Pound

Ordinarily I would agree with your advice however, I don't want to alert the franchisor just yet. I know of some history within the network that would lead me to believe that franchisees need to play their cards very carefully in these situations.

Unfortunately there is nothing that is specific in the agreement. It refers to penalties but doesn't give details about the calculation.

Thanks for the reply.

paddyrg

Next step - find some /former/ franchisees and ask them?

It's questionable how enforceable unlimited/non-specified penalties are, but let's not get to that stage...yet at least!

Sound_Pound

Ex franchisees are compelled to sign a confidentiality agreement about this aspect. I have finally found one who was prepared to hint at a few things but all have had the fear of God put into them. That's how I know about some elements of the formula mentioned in the orginal post. This particular franchisor will smile into your eyes while sticking the dagger in. Can be a nasty piece of work.

paddyrg

Offer to take the former franchisee to the pub so you can speak candidly and without them worrying you're recording calls, etc. Seeing you eye to eye is likely to be more productive than phone or email!