Question

Compare and contrast the two Franchise Agreements (Taste of Philly and Haagen Dazs) with respect to the contractual termination provisions.

Respond to each question using the number below, and post your answer as a separate paragraph in ONE forum post.

Under what SPECIFIC circumstances could the Franchisor terminate the agreement AFTER THE FRANCHISE IS OPERATING based on the Taste of Philly Agreement? Cite the contract location(s)

Under what SPECIFIC circumstances could the Franchisor terminate the agreement AFTER THE FRANCHISE IS OPERATING based on the Haagen Dazs agreement? Cite the contract location(s)

In general (not related to these two contracts) Why would a Franchisor not have a specific process and framework for terminating a Franchise? Is this a strategy or an oversight? Defend your position.

List 3 more specific reasons why a Franchise should be terminated - and why you believe these to be true. You may not use reasons cited in the agreements above.

Answer 1

Taste of Philly Agreement: Franchisee agreement

The franchisor can terminate the agreement under the section 17 of the contract agreement. The franchisor will give necessary notice period and terminate the agreement as stated in section 24 of the agreement.

Immediate termination of the agreement will be because of the following reasons:

1.      Under section 17.2 a: The franchise is insolvent or bankrupt.

2.      Under section 17.2.b The franchisee files for voluntary bankruptcy or insolvency.

3.      Section 17.2. d the franchisee premises are sealed due to outstanding judgment on payment of dues.

4.      Section 17.2. e: the franchisee mortgages, liens etc any part of the restaurant.

5.      Section 17.2. f: The franchise is a danger to public health and safety due to some construction etc.

Haagen Dazs: (Shop franchise agreement)

Haagen Dazs could terminate the franchise agreement based on the section 15.1.3 by giving notice of termination to the franchise due to the following reasons:

1. When franchisees fail to correct any default in a timely manner.
2. Under section 15.2.1.4 of the agreement where there is a noncurable default
3. Under section 15.1.2.5 which is if there are existing circumstances for terminating the agreement.

Further, under section 15.1.4 the notice of 30 days is mandatory except for reasons highlighted under:

• Section 15.1.2.4 i.e. failure to timely cure in case of health and safety standards, the activity threatens to impact the goodwill of the brand.
• Abandonment under section 15.1.2.5.4.
• Criminal activity under section 15.1.2.5.6
• Adulteration under section 15.1.2.5.7
• Any unauthorized transaction under section 15.1.2.5.8

The franchisor might avoid adding the termination clause as a strategy because of the following reasons:

1. Avoid paying compensation for the material and equipment procured specifically for the brand by the franchise.
2. The franchisor whether he adds the termination clause or is bound by law to follow a process that includes giving sufficient notice, having a good cause and giving the opportunity to cure the situation if possible. The further franchisor has to comply with the US regulations and laid down norms under section 9.1 (Refer franchise 2018). The law regarding franchisor and franchise agreement is clear regarding termination (but vary from state to state and are governed by the relationship laws) and all organizations have to adhere to them.

Franchisee could be terminated because of the following three reasons:

• They have violated the patent rights and have misused the companies proprietary material in another location or on material where it is not as specified in the agreement.
• The franchise is not willing to renovate the store as required by the organization if the branding changes due to a joint venture collaboration or the origination reworking its branding strategy. (The franchisor might have to pay for renovating the outlet as required by them)
• There is a change/or modification in the franchise agreement and the franchise is not comfortable with it. The franchisor will have to bear the costs involved and compensate the franchise for the damages.