Florida-based company seeks to terminate multiple franchised restaurants

April 05, 2013 (Press-News.org) Florida-based company seeks to terminate multiple franchised restaurants

Article provided by Usher Law Firm, P.A.
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Burger King Corporate in Miami, Florida has sued the owners of five Burger King franchises, claiming they violated the terms of their franchise agreements. Early this year, BKC sent letters to the owners terminating their franchise agreements for allegedly failing to submit required payments. The litigation is still pending and it has yet to be determined whether the restaurants will continue with the same owners or if new franchisees will take over.

Wrongful termination by a franchisor can have a devastating impact on a franchisee's business. That is why it is vitally important for franchisees to know their rights and responsibilities under their franchise agreements.

Franchise payments

Each franchisor invests time and resources into the development of its business and brand. In order to protect the goodwill and integrity of its product, the franchisor establishes a detailed agreement, the terms of which each franchisee must comply. In order to insure compliance by its franchisees, the franchisor also investigates and carefully monitors each franchisee's business looking for possible infractions.

All of this costs money, money that the franchisor recoups through monthly franchise payments. Such payments are typically a percentage of gross sales of the individual franchise and cover such expenses as:
-Advertising
-Promotions
-Use of trademarks and logos
-Use of branded materials or goods

Upon termination of a franchise agreement, the franchisee must stop operating the business as if it were still part of the franchise. For example, the Burger King restaurant franchisees must stop using and return all items that contain the Burger King logo. This includes such things as interior and exterior signs, menu displays, tray liners, food wrappers, posters, cups and uniforms.

Other reasons for termination

Payment requirements are easy to understand and track. There are, however, many other agreement provisions with which the franchisee must also comply that are not so easily understood.

Franchisees should carefully review their agreements and have an understanding of their obligations under each provision. They must comply with all federal, state and local laws regarding the type of business they are operating. Each state and municipality may have vastly different laws and rules and the franchisee is responsible to know the specifics for their locality. Such laws may deal with such issues as taxes, zoning, signage and off-street parking, to name just a few.

Conviction of a felony crime or a crime involving moral turpitude -- one that violates the community concept of honesty or morality -- is also grounds for termination. The basis for this provision is that when a franchisee is convicted of such a crime, the reputation of the franchisor is adversely affected.

Seek legal counsel

If you have questions about owning or operating a franchise, or need assistance setting up a successful business, contact an experienced franchise lawyer. An attorney knowledgeable about franchise law can help you find the right franchise, perform due diligence and understand the necessary documents and disclosures.