Franchisees in Ontario, Alberta, Manitoba, New Brunswick and peI (and soon in British Columbia) have a legal right to revoke or terminate their franchise (and sublease) contracts in cases where they are not disclosed. In the case of sublease, the owners do not care when there is termination and their lease is owned by the franchisor and they have the contract and the obligation to operate the franchisor. However, if the lease is made directly with the franchisee, the termination of the franchisee does not terminate its obligations arising from its lease agreement (or with its third-party lenders or suppliers). From a practical point of view, the withdrawal of franchisees will likely attempt to cease operations immediately or in the short term after the resignation or to induce the owner to negotiate a right to change the name of the company. Donors can face the reality of abandoned units in which franchisees try to purge their potential exposure to lenders over their franchisors during their dispute with their lenders. Owners must decide how to handle this event. Many franchisors want ultimate and direct control of rented premises. Some do so because they want the opportunity to charge their franchisees more rent under their sublease contracts than they pay to landlords. Some landlords do not want to rent tenants as part of subleased housing (or other benefits) and exclude this option. Apart from rental fees, some franchisors want the premises to be available exclusively and automatically when their franchisees are late in their franchise and sublease contracts. It is easier to win back premises in a situation of failure and termination when the franchisor holds the main lease. Franchisors (or their leasing partners) can more easily exclude licensed franchisees from leased premises if they hold the main lease.
Holding the head-to-head rental makes franchisors (or their leasing subsidiaries) directly liable to their owners. If their franchisees default, they must pay rent even if they are unable to work. Their leases may also require them to have provisions in this case to support and operate. In order to mitigate these risks, some franchisors try to inculcate a related business or business (excluding operating assets) in the holding company of head rentals if their lenders allow it. They also often look for extra time to find replacement franchisees, so they don`t have to work immediately. Some lenders aspire to direct liability for franchisees and their guarantors, in addition to franchisors (or their related companies). Some franchisors charge an additional deductible fee in the event of renewal or renewal. Others simply calculate the costs of renewal or extension. Still others completely waive the requirement for a renewal or renewal tax. In order to minimize the potential impact of a resignation, owners can take steps to protect themselves. First, they may require them to receive a copy of the disclosure document before renting the premises to assess the likelihood of resignation themselves.
They should require the disclosure document, which they rent directly to the franchisor or franchisee, as it will contain valuable information about franchisors, including the provision of another source of financial information. Second, they may require, as a term of any lease with a franchisee, that the franchisor, if it abandons the franchise agreement, take over the lease and be responsible for the healing of the failures. The franchisor may also reserve the right not to renew or renew the contract if the franchisor chooses, at its sole discretion, to withdraw from the market area where the franchise is located.