In a recent
DC Strategy case, the question as to how soon a franchisor must enter into a new lease or commence negotiations, in particular when there is uncertainty as to the lease being renewed was examined.
It became evident in these proceedings that following a strict recruitment process and ensuring that any discussions were well documented protected the franchisor from the allegations of misrepresentation.
DC Strategy
advisory services was instructed to represent a franchisee where the sale of business was wrongfully terminated by the purchaser because the franchisor was unable to secure a lease for the premises for which the franchisor was the lessee.
The court held that the contract for sale of a franchise business was not conditional on the grant of a new lease by the lessor to the franchisor as this was not the responsibility of the franchisee selling the business and that the purchaser had acted hastily in terminating the contract prior to the completion of the sale being finalised. It was also held that the grant of new lease was at the lessor’s discretion and the franchisor had no obligation to enter into the new lease prior to completion of the sale.
More importantly as this was a prime location for the franchisor, ensuring negotiations take place well in advance of the expiration or renewal of the lease to secure the premises is paramount and to ensure that it has done all it can to protect the interests of the franchisee.
18-Sep-2008