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I bought into a franchise agreement that was for 5 years…

I bought into a...

I bought into a franchise agreement that was for 5 years with a 5 year renewal option. The first 5 year period expired Aug 2015, which I forgot about renewing. No notice from the franchisor to renew.

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

Now I want to sell, but not buyers to buy into the franchise apart from the franchisor (at an incredibly low low price).

Lawyer's Assistant: What steps have you taken so far?

In Victoria. The franchisor tells me the rollover automatically happens if nothing is done at the time of renewal. Can I sell to someone who wants to start a cafe instead of being in the Franchise? Thanks Margaret

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

No, I think I have covered it thank you.

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Answered in 28 minutes by:
3/16/2018
John Melis
John Melis, Lawyer
Category: Australia Law
Satisfied Customers: 3,556
Experience: Principal Lawyer at Legal AU Pty Ltd
Verified

Hi, my name is***** solicitor in Melbourne. Thank you for using Just Answer, and I will answer your question today, and ask various questions to narrow the issues in your post raised.

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Margaret, this will depend on who has leased the premises which you are in ?

are you the lessee under the franchise agreement or is it another party, or is the lease in your own business name ?

can you please tell me more about your business structure ?

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Customer reply replied 5 months ago
I purchased the franchise in 2010 from the original owners who bought and fitted out the store 2005.
The lease and Franchise Agreement is in my name.
I am a sole trader. Term of the franchise agreement is Five (5) years.
Renewal or extension. The franchise may be renewed for one further term comprising of five (5) years.
The franchisee's goodwill, if any, on termination or expiry . The franchisee retains no goodwill on termination or expiry. The franchisee acknowledges that all goodwill which may arise from the franchisee's use of the industrial propertyu is and shall at all times remain the sole and exclusive property of (franchise's name) and shall accrue to the sole benefit of (franchise name). However, nothing contained in the preceding sentence shall be construed to prohibit the franchisee receiving from a sale of the business, a price which includes a payment for any goodwill belonging the the franchisee

thank you for the description.

based on your comments, as the lease of the property is in your name only, then there is nothing stopping you from selling the lease to another party to run a business of which they choose, such as a coffee shop. The franchise situation does not effect the lease of the premises.

does this answer your important question today.

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Customer reply replied 5 months ago
Thank you John.
The Franchisor today told me I was still bound by the Franchise Agreement until 2020. The second 5 year term automatically rolls over if nothing was done in 2015. Does this sound legal?

the franchise agreement may remain enforce subject to the term of the agreement.

but as the lease is in your personal name you can sell that lease to another person as you deem fit.

the franchisor does not have their name on the lease, you do, so you are in control of that process .

have I clarified your question today ?

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Customer reply replied 5 months ago
Thanks John,
Can Franchise Agreements just roll over without any notification of the first term (5) years expiring?

generally all franchise agreements must be renewed in writing.

a roll over agreement would be an unfair contract in relation to that term.

You can come back to this post any time to ask questions and there will be no further charges to you.

Don't for get to rate me for 5 stars as this supports me helping the community and thank you for using Just Answer.

John Melis
John Melis, Lawyer
Category: Australia Law
Satisfied Customers: 3,556
Experience: Principal Lawyer at Legal AU Pty Ltd
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