Breaking a franchise contract early may be hard to do

You can never be sure how long you will stay in business. Sometimes you just do not find it feasible to keep running your company and you want out. However, if you run a franchise in Pennsylvania, a swift and easy exit may not be in the cards. In fact, if you have not planned for an exit strategy, it could cost you a lot of money to end your franchise prematurely. So if you are considering starting a franchise, think about how you can get out of your franchise if you want to.

Marketwatch recommends that people who are looking to buy into a franchise should examine the contract for clauses that address how to leave the franchise. Some contracts specify a fixed period of time for the contract to be in effect. You want to be sure that your contract does not require you to pay a fee for breaking the contract early.

There are also loans to consider. Whether you are still in business or not, if you have taken out loans to pay for building your franchise location or for store inventory, you still have to pay those loans off. And if you have leased your franchise's physical location space, you might want to break that lease too, but a landlord may insist on the full lease amount even if you want out of the lease early.

Chron.com also cautions that many franchise contracts include a “no-kill” clause. These clauses prevent a franchise owner from ending the contract before a set number of years. These clauses may not even include a termination fee that you can pay to get out of the contract early. This might leave you with few options to break your agreement, though some franchise owners have chosen to declare bankruptcy to discharge debts and break off their franchising agreement.

If you are still uncertain about a franchisor’s terms of leaving the franchise, you can also ask the franchisor or the franchise association about it. If you do own a franchise, you want to be careful and not indicate you want to get out of your contract. Instead, ask hypothetically about franchise termination to gain your answers. You can also seek the advice of a professional business attorney about options you may not have considered.

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