Franchise attorney, are there risks if the headquarters unilaterally terminates the franchise contract?

Yes, when terminating a contract with a franchisee, it can lead to a franchise lawsuit.

When a headquarters, that is, a franchisor, intends to terminate a franchise contract with a franchisee, several requirements must be observed.

First, the headquarters can terminate the franchise contract only when certain grounds making it difficult to continue the franchise contract apply.

Representative grounds for terminating a franchise contract

▶ When the franchisee has filed for bankruptcy or compulsory execution procedures or rehabilitation procedures have commenced

▶ When promissory notes/checks issued by the franchisee have been suspended due to dishonor, etc.

▶ When the franchisee can no longer operate the franchise business due to natural disasters, serious personal reasons, etc.

▶ When the franchisee has received qualification/license/permit revocation or business suspension orders for violating laws related to franchise operation

If it is difficult to determine whether something constitutes grounds for franchise contract termination, it is good to seek advice from a franchise attorney.

If such grounds occur and the franchise contract is to be terminated, the franchisor must notify the franchisee with a grace period of at least 2 months.

In particular, "specific contract violation facts" and "if the violation is not corrected, the contract will be terminated" must be notified in writing 2 or more times.

If a franchise contract termination is made without such notification, it has no legal effect and may lead to a lawsuit, so it is good to have it reviewed by a franchise attorney.