In a franchise dispute, act early to save your business
A breach notice is a document you should never ignore — fail to act on it and your business may be at risk.
Formal breach notices are generally issued once a franchise dispute escalates and a conciliatory resolution cannot be achieved.
However, this is not always the case because some franchisors may resort to issuing a breach notice straight away.
What is a Breach Notice?
Under the Franchising Code of Conduct (Code), a franchisor is permitted to terminate a franchise agreement if they give you a breach notice and you fail to remedy your breach in accordance with the requirements of the notice. A breach notice is the first step in the termination process and used as a formal warning that your business is non-compliant.
A breach notice must:
- specify the provision of the franchise agreement which has been breached;
- set out what you are required to do to remedy the breach; and
- provide a reasonable time for you to remedy the breach.
If the franchisor wishes to rely on the breach notice to terminate the franchise agreement, the notice must also state that the franchisor proposes to terminate the franchise agreement if the breach is not remedied.
If you fully remedy your breach in accordance with the requirements of the breach notice, then the franchisor cannot rely on that breach to terminate your franchise agreement.
If you fail to comply with all conditions of the breach notice, the franchisor is entitled to terminate your franchise agreement.
Remember that there are certain circumstances under the Code which entitle a franchisor to immediately terminate a franchise agreement without following the breach notice process, such as fraudulent behaviour.
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