keyboard_arrow_up

Terminating a Franchise in Florida

There are many advantages to running a franchise. As a franchisee, you may have access to the training materials, branding, advertising, and reputation of a major company. You may also be spared of the many normal start-up costsrelated to business ownership. If you have been a part of a franchise relationship, then you probably have some understanding of Florida contract law, or you value the importance of having a Florida business lawyer who understands Florida contract law.  Similarly important may be the need to seek out a Florida business attorney if you decide to terminate your franchise contract.It is important to get legal advice in order to understand your rights, responsibilities and obligations.

Ending a franchise contract may require certain sacrifices. Access to customer and business contacts, knowledge obtained via the franchise relationship, customer goodwill, and the ability to compete within the same market as the franchisor can all be retained or lost depending on the specific nature of the franchise relationship and the written contract of the franchise.

The proprietary nature of customer lists and business contacts may depend on the manner in which such contacts were obtained. The Florida Uniform Trade Secrets Act (FUTSA) says that if a former franchisee possesses information that is relatively secret and has real or projected economic value, the franchisor may have a legitimate legal claim to that information. Thus, in the case that your customer lists meet these conditions, you may have to surrender all rights to them in the event of a franchise termination. To learn more about your rights and obligations when dealing with sensitive information, you may want to reach out to a Florida business lawyer.

In Florida, certain court cases have determined that the difficulty of obtaining customer contacts should be the determining factor in deciding whether a customer list should be considered a trade secret. There has also been a distinction made between active and prospective customer lists. Prospective customer lists – that is, lists of potential customers – are generally not considered proprietary, while active customer lists may be regarded proprietary or trade secret if significant effort went into compiling them. On the other hand, the franchisee may have a legitimate claim to ownership of the customer list if customers were attracted by the efforts of the franchisee rather than by the franchise name and reputation. In other words, courts determine whether customer lists are trade secrets and whether they belong to franchiser or franchisee on a case-by-case basis.

In addition to customer and business contact lists, franchisees may benefit from the training and knowledge of business operations delivered by franchisors. When dissolving a franchise, you may have a legal obligation not to use the specific knowledge gained through the franchise relationship to compete with your former franchisor. Seek out Florida legal services to determine the specific nature of your claim to information and training, and to obtain proper guidance for your business.

A further advantage of the franchise relationship may be customer goodwill, which “is based upon the prospective profits to result from voluntary continued patronage of the public. It indicates that value which inheres in the fixed and favorable consideration of customers arising from an established and well-conducted business.”A Florida business lawyer can help you understand the practical meaning and real-world applications of goodwill. As with customer contact lists, legal claim to customer goodwill is decided on a case-by-case basis. If you have advertised independently of the franchisor or have contributed significant funds to franchisor-controlled advertising campaigns, you may be able to continue to use customer goodwill gained during the franchise agreement.Nonetheless, in most instances, you will be legally prevented from entering into direct competition with the former franchisor.

Many franchisors protect their business interests by requiring franchisees to sign restrictive covenants, including non-compete agreements. In Florida, your responsibility and limitations on adhering to these agreements depend on a variety of factors. Florida contract law can be complex and nuanced, and seeking legal advice from a Florida attorney can guide you through the understanding of contracts, restrictive covenants, and other terms and obligations.

It is advisable to consult a lawyer to ensure that you understand your rights and responsibilities when dissolving a franchise. Apfelbaum Law has Florida business attorneys who can assist and guide you through the process, as well as other business matters.  If you have questions related to franchise law, Florida contract law, or any other Florida legal services in Port St. Lucie, Stuart, Vero Beach, or throughout Florida, contact Apfelbaum Law for a consultation.