Does the RI Amended Law Set A New Franchise Standard?
Does the amended Rhode Island (RI) that was passed and agreed to by many parties including the IFA, CFA, DDIFO, Dunkin Brands and others set a new standard for termination clauses in franchise agreements, moving forward?
The RI law calls for:
60 days prior written notice of termination, cancellation, or nonrenewal.
30 days in which to cure any claimed deficiency, provided that a dealer has a right to cure 3 times in any 12 month period.
Even though the dates had been reduced from the original law, it still sounds fair and reasonable to me.
The AAFD Published Standard in its Fair Franchising Standards:
STANDARD 12.3 DEFAULT BY A FRANCHISEE
A franchise agreement should contain a provision setting forth material events of default by a franchisee, a franchisors right to terminate for good cause, after notice and a reasonable time to cure, where appropriate, and a franchisee’s post termination rights and obligations.
The RI Law quantifies the time frame, the question is: Is 60 days notice and 30 days to cure sufficient?
If so, maybe the AAFD should consider using the RI law as the basis of its "Default By A Franchisee" standard?
If it does, that standard has already been vetted and agreed to in RI by the powers that be.
- Franchise topic:
Default Times
Jim, there is no one size fits all for franchise agreements - which is why the AAFD refers to reasonable notice.
The new legislation may or may not meet the AAFD standards depending on whether for a particular franchise the statutory notice period is reasonable.
Michael Webster PhD LLB
Franchise News
Can you set the bar??
Michael,
OK, I understand that the AAFD would rather not commit to a specific time frame.
But, if the AAFD was grading a typical (you ask what's typical) franchise agreement, would the RI law be deemed meeting standards in most cases?
Jim Coen
877-469-3002
Blog: Lets Talk Franchising
Executive Director of the New England Franchise Association
Director & Clerk, Dunkin Donuts Independent Franchise Owners (DDIFO) Board of Directors
Time Frame
Jim, when I look at a franchise agreement wrt termination notices, I look at a number of things.
1. If the infraction is cured, then can you renew?
2. Is there are a rolling count on infractions, even if they are cured?
3. Are the monetary penalties for settling a termination notice?
There and other considerations are what the AAFD looks for in a contract and relationship.
Michael Webster PhD LLB
Franchise News
Yes, Yes, A Resounding Yes!
Yes, Yes, a resounding Yes! It would appear to me that franchisor and franchisee alike agreed that this is fair and workable solution. Kudos to all parties for finding the win/win solution to what was previosly a vexing problem.
Other states should take notice: Franchising is alive in well in Rhode Island and is well-positioned for future growth.
Agreed--RI sets the franchise standard
Jim, you've hit the nail on the head.
It is fair and the Zors and Zees agreed on it. No one got everything that they wanted, but everyoe got what they needed.
Zors who complained were mostly concerned about the extremely bad franchisee who is in continual default. THe solution there is to be more selective with your franchisees and have great training---not to grant a license to anyone just because they can come up with the intial fee.