What happens when a franchise relationship is over

We humans have a tendency that we always pay attention to what happens before and during the beginning of a business especially franchise business. But we hardly bother to know that what will happen when it will end. Franchise relationship comes to an end due to two reasons:

• Natural expiration of the agreement
• Termination of the agreement by the franchisor or the franchisee.

Natural expiration of the agreement:

In this case, either the franchisee will renew the agreement again or will move out. If he wants to get it renewed then he has to consider the new rules of the franchise. It also depends upon the franchisor whether he will give the contract again to him or not. In case the franchisee decides to move out, if he was operating the franchise business from his house then there is no issue involved with it. But, if he was operating it from a proper accommodation to then the franchisor can use it for his own use or can sell it to the new franchisee.

Termination of the agreement by the franchisor or the franchisee :

  The franchisor can easily terminate the agreement when he is not getting the royalty fees and other fees on time or when the franchisee is not working according to the rules of the franchise. Whereas, the franchisees usually terminate the agreement when the franchise is not proving to be profitable for them. From a franchisor's perspective, the main reason for terminating or not renewing a franchise is related to the franchisee's default. That is, the franchisee does not pay the required royalties and does not operate the franchised business in accordance with the standards and specifications of the franchisors.  

On the other hand, sometimes franchisees do want to renew their contract. How is a franchisee evaluated if he/she does want to continue? 

Franchisees typically have contractual options for renewal of franchise agreements. In addition, many states have enacted franchise relations laws that create a statutory right in favor of a franchisee who wishes to renew their franchise. The factors that franchisors will consider regarding the renewal of a franchisee refer largely to previous franchisee performance, franchisee satisfaction and payment of all fees and obligations owed to the franchisor and whether the franchisee will improve the business franchisee to adjust to the franchisors then the current standards, specifications and requirements of the trade dress.