Protecting Your Franchise Business in Minnesota
At Collins, Buckley, Sauntry, & Haugh, PLLP, our team of corporate law attorneys is focused on protecting our clients’ businesses from any and all legal threats. We often represent franchisees and find that, as a group, these business owners face a unique set of legal concerns stemming from the franchisor-franchisee relationship.
Typically, franchises are controlled by large national or even international companies with established brand names. Considering that the owners of individual franchise locations are usually individuals or small businesses, and you can see that there is a significant imbalance of resources and bargaining power between franchisors and franchisees. Fortunately, there are laws in Minnesota aimed at protecting franchisees from being taken advantage of.
The Minnesota Franchise Act
The Minnesota Franchise Act was passed to level the playing field between franchisors and franchisees. The Act protects franchisees from the start of the franchise relationship, prohibiting franchisors from making false statements or omitting any material facts when selling or offering to sell a franchise.
The Franchise Act also imposes civil liability upon any franchisor whose actions are found to be “unfair or inequitable” with regard to the franchise, which may include imposing unreasonable rules or requirements on the franchisee or discriminating between franchisees. The Act gives franchisees a private right of action against franchisors who violate provisions of the law and allows for the recovery of money damages and attorneys’ fees.
Termination and Non-renewal Protection
The Franchise Act further protects franchisees by limiting the circumstances under which a franchise may be terminated. The statute provides that, except in limited situations, the franchisor cannot terminate the relationship without giving 90 days written notice stating the specific reasons for termination. The franchisee then has 60 days to cure the problem and avoid termination.
It is important to note that the franchisor must have “good cause” to terminate the relationship, which the Act defines as “failure by the franchisee to substantially comply with the material and reasonable franchise requirements.”
Not only does the Franchise Act protect against unfair termination, but it includes similar protections with regard to non-renewal. Therefore, franchisors can only decline renewal of a franchise with 180 days written notice. And as with termination, they must have good cause and allow the franchisee the chance to cure the defect. Additionally, a franchisor is prohibited from denying renewal in order to take over ownership of the franchise itself.
Finally, franchisors may not unreasonably withhold their consent to the transfer or sale of a franchise to another qualified buyer.
Franchise Lawyers in Minnesota
Protecting your franchise business within the imbalanced power dynamics of the franchisor-franchisee relationship requires a legal team that knows the ins and outs of franchise law, including the Minnesota Franchise Act and federal franchise statutes.
The corporate attorneys at Collins, Buckley, Sauntry, & Haugh, PLLP routinely assist franchise owners in protecting their bottom line and fending off the unfair practices of franchisors. For more information about franchise protection, please call us at 651-227-0611 or contact us online.