Can a franchiser sell or close the company with active franchisees?

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Can a franchiser sell or close the company with active franchisees?

We own a franchise and the franchiser wants to sell or dissolve the company. We are 1 of 2 remaining active franchisees and have ongoing contracts to fulfill. Can the franchiser simply sell or close the company and we are left with no recourse, or does he have to buy us out? He has also offered to sell us the company, but we have already paid our franchise fee and done more than our share of the requirements in the contract (marketing, national sales, etc.) Should we be expected to pay him to continue our business? Also, does he owe us money should he close the company?  And do we simply close our franchise because of his choice to bow out? Should we speak to a business law attorney? In New Castle, DE.

Asked on November 30, 2010 under Business Law, Delaware

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Your franchise agreement is a contract as between you and the franchiser.  You need to pull it out and see what it says about and if this situation is even covered.  What I am sure about is that the franchising agreement most likely has duties for both you and the franchiser.  The franchiser should be giving the business support in some way, correct?  So if the franchiser closes the business and the support is no longer there then there is a breach in the contract and contract remedies apply.  But again, the agreement needs to be read.  You could have agreed to limited compensation in this very scenario and not even realized it.  If the agreement is silent then your state laws will apply.  Get legal help.  Good luck.


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