If I was doing a franchise business but couldn’t afford it anymore so decided to leave the franchise and do my own business, am I allow to do that?

The business is not doing well and have I have to put money in every month. If I am doing a same type of business as the franchise, just that I am not using their brand and license, I am on my own. And I am doing the business at the same rental space because I signed a lease for 10 years.

Asked on August 12, 2014 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

There is no general answer, because of critical importance are the exact terms, conditions, and provisions of the franchise agreement and any other documents you signed in opening the  franchise. If they contain terms, for example, which restrict you from conducting  the same type of business within a certain geographic area, or for some number of months or years after ceasing to be a franchise, such terms are generally enforceable and would preclude you from doing what you want. For a definitive answer, you must have an attorney analyze the franchise agreement and any other contracts, especially in regards to any restrictive covenants or non-competition clauses.

The above said, there are some general principals that could also restrict you:

1) You may not use any thing learned or obtained as a franchisee, such as customer lists, proprietory business processes or techniques, etc. You were only given access to such to run a franchise; the law does not allow you to take another's trade secrets and use them for your own benefit.

2) You may not operate in any way that suggests a connection between you and the franchise after you are no longer a franchisee. This goes beyond not using their brands (though this is a good start).


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.