Q: What are the valid grounds for a franchisor to refuse the renewal of a franchise contract?
A: Primarily the franchisor may refuse renewal if the lease of the site is no longer made available for the franchisee. However under such circumstance, the franchisor may advise the franchisee to look for another suitable place.
The other factor is the non-compliance to the standards of the franchisee. If and when the franchisee is not consistent in following the standards and based on the performance evaluation of the franchisor, such renewal may not be possible.
Performance evaluation is a thorough process and carried from the time the franchisee begins the business. The franchisor often writes the reason why renewal may not be possible and sent to the franchisee at least 90 days prior renewal.
Armando "Butz" O. Bartolome is currently President of GMB Franchise Developers, the pioneer franchise development company in the country and is behind the growth and expansion of over 200 local companies. You may reach him at firstname.lastname@example.org.