Can My Franchisor Refuse to Renew My Franchise Agreement?

If you’re a Franchisee, it’s vital to understand your rights and obligations concerning renewal. Not adhering to renewal conditions or properly understanding what the franchise agreement says concerning renewal rights could result in franchisees losing the opportunity to renew. This article sets out some key considerations for all franchisees on the important topic of franchise renewal. 

No Automatic Right to Renew

In most cases, franchisees don’t have an automatic right to renew their franchise agreement. Instead, they must meet certain conditions to qualify for renewal. These conditions are typically outlined in the franchise agreement and must be satisfied to ensure a seamless transition into the next term.

In addition, the franchise disclosure document will summarise the franchisees renewal rights. It’s important to keep in mind, however, that the disclosure document is not a contract. Accordingly, to the extent of any inconsistency as between the disclosure document and the franchise agreement, the franchise agreement will prevail. Both documents should, therefore, be scrutinised. 

Conditions for Renewal

Notice Period

One of the primary conditions for renewal is giving notice within a specified time frame. Franchise agreements usually require franchisees to inform their franchisor of their intent to renew well before the agreement’s expiration. This notice period can vary but is often around six to twelve months.

Additionally, the Code requires franchisors to provide notice of their intention to renew. In most cases, that notice must be provided at least 6 months before the expiration of the Franchise Agreement. It is common practice for that notice to set out any conditions of renewal. Common examples are discussed below. 

Further Training

Franchisees often need to undertake further training to stay updated with the brand’s standards. This ensures that the franchisee remains aligned with the franchisor’s operational and service expectations. Training can include new operational procedures, updated marketing strategies, and other relevant areas.

Compliance with Agreement and KPIs

To qualify for renewal, franchisees must commonly not be in breach of the agreement. In addition, the Franchise Agreement may specify the Franchisee must have adhered to certain criteria during the initial term to qualify for renewal. For example, this includes adhering to all operational guidelines, financial obligations, and other contractual requirements. Additionally, franchisees may be required to comply with key performance indicators (KPIs) or similar benchmarks throughout the term. These KPIs may cover areas such as sales targets, customer satisfaction, and operational efficiency.

Refurbishment Requirements

For fixed premises franchises, it’s common to impose a requirement to refurbish the premises as a condition of renewal. This ensures that the franchise location remains up-to-date with the brand’s current image and standards. Refurbishment can include renovations, updates to fixtures and fittings, and other improvements to maintain a high-quality customer experience.

Payment of Renewal Fee

Most franchisors impose a renewal fee, which must be paid as a condition of renewal. That fee is commonly expressed as a fixed sum, though can also be expressed as a percentage of the franchisor’s ‘then current’ standard initial franchise fee. 

Planning for Renewal

Franchisees should carefully review the renewal clauses in their franchise agreement. Planning for renewal well in advance is crucial to meeting all conditions and avoiding last-minute issues. Ideally, franchisees should start preparing for renewal at least 12 months before the initial term expires. This preparation allows them to address any potential issues, complete required training, and plan for any necessary refurbishments.

Statutory Obligation of Good Faith

Despite the various conditions for renewal, franchisors are subject to a statutory obligation of good faith as mandated by the Franchising Code. This obligation requires franchisors to act honestly and fairly in their dealings with franchisees, including during the renewal process. Franchisors must not act in a way that is misleading or deceptive and must consider the franchisee’s legitimate interests. If a franchisor unfairly applies a renewal condition or fails to provide adequate notification, good faith issues could be raised. These are further explored in our article here

Dispute Resolution

If a franchisor refuses to renew the agreement or imposes harsh or unfair conditions on renewal, franchisees have options to address this issue. They can raise a dispute using the dispute resolution clause in the franchise agreement or as set out in the Code. This clause and the Code provisions outline the process for resolving disagreements between the franchisor and franchisee, which typically starts with issuing a formal dispute notice. 


Understanding the conditions for renewal and planning well in advance can help franchisees navigate the renewal process successfully. By meeting all the required conditions, staying informed about their rights, and knowing how to address potential disputes, franchisees can ensure a smoother transition into the next term of their franchise agreement.


Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply