Franchise Termination: When Is a Franchisor Allowed to Pull the Plug and When Is It Wrongful?

If you own a franchise, few things are more unsettling than getting a notice from the franchisor saying your agreement is being terminated. For many franchisees, the business represents years of investment, personal guarantees, and day-to-day sweat equity. When a franchisor threatens termination, the immediate question is simple but urgent, “Can they actually do this?”

The short answer is: sometimes yes, sometimes no. Franchise termination is governed by a mix of contract law, franchise disclosure rules, and state-specific protections. In Florida, and nationwide, franchisors do not have unlimited power to end a franchise relationship, even if the contract seems one-sided.

Below, we break down how franchise termination works, when it may be lawful, and when it crosses the line into wrongful termination.

What Is Franchise Termination?

Franchise termination occurs when a franchisor ends the franchise agreement before its stated expiration date. Once terminated, the franchisee typically must stop operating immediately, debrand the business, and may lose access to suppliers, systems, and customer goodwill.

Termination is not the same as non-renewal. Termination happens mid-contract, and mon-renewal happens at the end of a franchise term. The legal standards for each are different, and termination is far more aggressive.

Can a Franchisor Terminate a Franchise Agreement?

Yes, a franchisor can terminate a franchise agreement, but only under specific conditions.

Most franchise agreements list “events of default” that give the franchisor the right to terminate. Common examples include:

• Failure to pay royalties or fees
• Failure to meet brand standards
• Unauthorized transfers or ownership changes
• Repeated operational violations
• Abandonment of the franchise
• Criminal conduct related to the business

That said, the mere presence of a default clause does not automatically make termination lawful.

Courts look beyond the contract language and ask whether the franchisor followed the agreement and acted in good faith.

What Is “Good Cause” for Franchise Termination?

Many franchise disputes turn on whether the franchisor had good cause to terminate. Good cause generally means a material breach of the franchise agreement that goes to the heart of the relationship, not a minor or technical violation. Examples may include chronic nonpayment, fraud, or conduct that seriously harms the brand.

Termination based on trivial issues, selective enforcement, or pretextual reasons is often challenged as wrongful.

Does a Franchisor Have to Give Notice Before Terminating?

In most cases, yes. Many franchise agreements and state laws require the franchisor to provide:

• Written notice of the alleged default
• A clear description of what needs to be fixed
• A reasonable opportunity to cure the issue

Failure to give proper notice is one of the most common grounds for wrongful termination claims. Some defaults may allow immediate termination, but those are typically limited to extreme circumstances such as criminal conduct or threats to public safety.

What Is a Cure Period in a Franchise Agreement?

A cure period is the time the franchisee is given to fix the alleged problem. Common cure periods range from 10 to 30 days, depending on the issue. If the franchisee corrects the default within that window, termination should not proceed.

If a franchisor ignores a valid cure or refuses to acknowledge compliance, that behavior can become evidence of bad faith.

When Is Franchise Termination Considered Wrongful?

Franchise termination may be wrongful when:

• The franchisor lacks good cause
• The franchisor fails to provide proper notice
• The franchisor denies a reasonable cure opportunity
• The termination is retaliatory
• The termination is based on selective enforcement
• The franchisor is trying to force a buyback or resale

Wrongful termination claims often arise when a franchisee begins questioning fees, reporting misconduct, or asserting contractual rights, only to face sudden enforcement actions.

Can a Franchisor Terminate a Franchise for Minor Violations?

Not usually, at least not without risk. Courts routinely look at whether the violation is material or merely technical. Using minor infractions as a pretext to terminate is a common litigation issue in franchise disputes.

Consistency also matters. If other franchisees commit the same violations without consequence, selective enforcement may support a wrongful termination claim.

What Happens After a Franchise Is Terminated?

Once termination occurs, franchisees are often required to:

• Immediately stop using the brand
• Remove signage, logos, and marketing
• Return confidential materials
• Stop operating under the franchise system

At the same time, franchisors may pursue damages, liquidated damages, or injunctions. This is why early legal intervention matters. Once termination is finalized, leverage is often lost.

Can a Franchisee Challenge a Termination?

Yes, franchise termination disputes are commonly litigated.

Depending on the facts, a franchisee may seek:

• Injunctive relief to stop termination
• Damages for lost business value
• Declaratory relief regarding contract rights
• Claims for breach of contract or bad faith

The key is timing. Waiting too long can limit available remedies.

Why Franchise Termination Disputes Require Careful Legal Strategy

Franchise agreements are complex documents drafted to favor the franchisor. Challenging termination requires a detailed review of:

• The franchise agreement
• The franchisor’s enforcement history
• Notice and cure compliance
• Communications between the parties
• Applicable state and federal franchise laws

These cases are not about emotional arguments. They are about precision, documentation, and understanding how courts interpret franchise relationships.

Final Thoughts for Franchise Owners Facing Termination

If you are facing a franchise termination, do not assume the franchisor is automatically right. Many terminations are legally vulnerable, even when they appear aggressive or inevitable. The sooner you understand your rights, the more options you may have.

At our law firm, we represent business owners in complex commercial disputes, including franchise termination and wrongful termination claims. We approach these matters with a focus on strategy, leverage, and long-term outcomes, not just reacting to pressure from the other side.

If you are dealing with a threatened or completed franchise termination, contact one of our experienced attorneys in Miami at 305-570-2208.

You can also contact our team directly at: arianna@ayalalawpa.com

Schedule a case evaluation online here.

[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].