You received a notice of default, a termination, or a refusal to renew

There is a clock running. Most franchise agreements give a short cure period, sometimes five or ten days for a money default, and the period usually starts when the notice was sent rather than when you read it.

So the first thing to do is find the termination article in your agreement and work out exactly how long you have. The second is to understand what the franchisor is and is not allowed to do. This page covers both.

Florida does not have a law protecting franchisees from termination

A number of states require a franchisor to have good cause, give notice, and allow a chance to cure before terminating or refusing to renew. Florida has not passed one.

The Florida statute that does address franchising, section 817.416, only covers misrepresentations made when the franchise was sold. It says nothing about ending the relationship.

Florida does protect a few specific industries. Motor vehicle dealers have protection under section 320.641 of the Florida Statutes, which requires ninety days notice with the grounds stated and puts the burden on the manufacturer to show the action was fair. Beer distributors have protection under section 563.022. Gas stations and other motor fuel franchises are covered by a federal law, the Petroleum Marketing Practices Act, which limits the grounds for termination, requires ninety days notice, and lets the franchisee sue and recover attorney's fees.

If you are not in one of those industries, your protection comes from your contract and from general Florida contract law. That is less than franchisees hope for and more than they are often told.

What general Florida law does require: the breach has to matter

A franchisor cannot terminate over something trivial.

In Burger King Corp. v. Mason, 710 F.2d 1480 (11th Cir. 1983), the franchisor argued it could enforce its termination clauses strictly, regardless of how serious the defaults were. The court rejected that and upheld a jury instruction that a franchise could not be revoked without a material breach. The jury in that case found fourteen terminations wrongful and thirteen valid, and the court of appeals affirmed the split.

Whether a breach is material is a question of fact. That is why these cases are worth fighting and why franchisors settle them.

The defenses that actually work

The franchisor breached first. This is the strongest one. Under Florida law a party that commits the first material breach cannot then enforce the contract against the other side. In a franchise setting this looks like: promised support, supply, training or marketing that never arrived; a territorial or development commitment that was broken; obligations imposed that the agreement does not authorize.
The default is not material. Payments that were late but cured. A standards issue that caused no harm. A reporting lapse. The finder of fact decides.
The franchisor did not follow its own notice procedure. If the agreement requires written notice specifying the default and giving a stated cure period, and that was not done, the termination is vulnerable. This argument is very effective in negotiation. Be aware that we have not found a Florida or Eleventh Circuit decision striking down a franchise termination on this ground alone, so it is a sound contract argument rather than a settled winner.
Waiver, which is weaker in Florida than you would expect. If the franchisor accepted late payments for two years and then terminated for a late payment, that feels like waiver. The obstacle is the non-waiver clause that nearly every franchise agreement contains, which Florida courts enforce. The argument is not dead, but it usually needs conduct that amounts to an agreed change to the deal, not just a pattern of tolerance.

Two mistakes that make everything worse

Do not keep operating under the brand after a termination takes effect. The Eleventh Circuit has held that a former franchisee's continued use of the marks is trademark infringement, because a customer sitting in a restaurant covered in the franchisor's signage will reasonably assume the franchisor stands behind it. A franchisor facing a holdover will move for an injunction and will usually get one. You then have a federal trademark judgment, an attorney's fee exposure, and no business. Note also that a court in this district has said wrongful termination is not a defense to trademark infringement. You can be right about the termination and still lose the injunction.

Do not stop paying to create leverage. Withholding royalties is how a good claim becomes a clear default. Pay under protest, in writing, reserving your rights, and fight the dispute as a dispute.

Can you get a court to stop the termination?

Rarely. A preliminary injunction requires a substantial likelihood of winning, irreparable injury, a balance of harms in your favor, and no harm to the public interest, and courts describe it as an extraordinary remedy. The hardest element for a franchisee is usually irreparable injury, because lost profits can be compensated in money.

We looked for a Florida or Eleventh Circuit case in which a franchisee successfully stopped a termination by injunction and did not find one. We would rather tell you that than take a fee for a motion with poor prospects. Where there is a real argument, we will make it.

What you can recover if the termination was wrongful

Florida allows a business to recover lost future profits even if it is new and has no track record, so long as you prove that the defendant's conduct caused the loss and that there is some reasonable standard for measuring it. That rule comes from the Florida Supreme Court in W.W. Gay Mechanical Contractor, Inc. v. Wharfside Two, Ltd., 545 So. 2d 1348 (Fla. 1989).

In practice the fight is over causation and measurement. Historical sales, system averages, comparable unit performance and expert testimony all do real work. Where a fee shifting statute applies, and both the Florida Deceptive and Unfair Trade Practices Act and section 817.416 contain one, the economics of the case change.

Non-renewal is a different question

If your term is simply expiring, look for a renewal right in the agreement and check the disclosure document, which had to state whether renewal exists and what conditions attach. The usual conditions are a renewal fee, signing the current form of franchise agreement rather than yours, remodeling to current image, and a general release. Where a renewal right exists and you met the conditions, a refusal is a breach. Where the agreement grants no renewal right, expiry is expiry.

Then read the non-compete. Florida enforces restrictive covenants under section 542.335, and that statute has a rule specific to former franchisees: a court presumes a restraint of one year or less is reasonable and presumes a restraint of more than three years is unreasonable. The same statute directs that a court is not to consider the personal financial hardship enforcement would cause you. Your own situation is not a defense.

Talk to an attorney now, not after the cure period runs

If you have a notice in hand, time is the one thing you cannot get back. Even a short conversation can tell you whether the notice is valid, how long you actually have, and whether to cure, negotiate or fight.

Consultations on franchise matters are free. Bring the notice, the franchise agreement and your disclosure document.

Request a free consultation or call 305.615.1617.

If you signed a personal guaranty, read personal guarantees and individual exposure next.

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This page is general information about Florida and federal franchise law. It is not legal advice, it does not create an attorney-client relationship, and it cannot account for the terms of your particular agreement. Read more about our franchise practice.