Legal Question in Business Law in California

Re: franchise contracts

It really depends on what your original franchise agreement said--I have seen that provision in other agreements. However, you might be able to raise an argument or two because of that provision that would enable you to get out of your agreement. I don't have an answer until I can know more and read your agreement. You may email me and I'll give you my phone and contact information.

Mr. Franchise Weighs In

Unless your franchise agreement provides for increases in royalty, etc. fees AND this was properly disclosed in your Franchise Offering Circular, the answer is no. It's very unusual to see this in typical franchise agreements. In fact, other than discounted royalty payments (i.e. 3% in year one; 4% in year two; then 5% for all future years), in reviewing hundreds of franchise agreements over the past 25 years I've never seen the type of provision you describe. It is not unusual to see a provision calling for execution of a new agreement at renewal, and that the renewal agreement may contain materially different terms, including different royalty and advertising fees. But that must also be disclosed in the original Franchise Offering Circular and contained in the original franchise agreement. Feel free to visit our website and read the "Buying A Franchise" and "Articles II" sections as they provide a wealth of information and advice for persons evaluating franchise investments. Good luck - Mr. Franchise

Re: franchise contracts

no. unless the contract terms state that the franchisor can increase royalties.

Re: franchise contracts

Your contract determines how and when changes are made. Get it reviewed by counsel if you think it has been breached. Feel free to contact me.