Franchise Terminations: Defenses and Legal Representation

In the world of franchising, the termination of a franchise agreement can be a complex and contentious issue. Franchisees facing termination must understand their rights and the defenses available to them. Equally important is choosing the right legal representation to navigate these challenging waters.

Defenses to Franchise Termination

Breach of Contract by Franchisor: If the franchisor has failed to uphold their end of the franchise agreement, this can be a strong defense. Examples include not providing agreed-upon support or infringing on the territory rights of the franchisee.
Lack of Proper Notice: Franchise agreements typically require the franchisor to provide notice before termination. If this procedure is not followed, it can be a valid defense.
Unreasonable or Unjust Termination: Franchisees can argue that the termination is unreasonable or unjust. This might be the case if the franchisor terminates the agreement without a valid reason or for a minor infraction that could have been resolved.
Good Faith and Fair Dealing: Franchisees can contend that the franchisor did not act in good faith or deal fairly. This is a broader defense that encompasses various actions by the franchisor that might be deemed unfair or oppressive.
Discrimination: If the termination is based on discriminatory reasons, this can be a legal defense, especially if it violates state or federal laws.
Retaliation: If the termination is in retaliation for the franchisee exercising a legal right, such as reporting violations, it can be contested legally.

In Illinois, defenses to franchise terminations can be found in the Illinois Franchise Disclosure Act (IFDA) and related case law. The IFDA prohibits the termination of a franchise prior to its term expiration unless “good cause” exists, which can include the franchisee’s failure to comply with a lawful provision of the franchise agreement.

Another defense is the limitation of damages under the IFDA to sales occurring within Illinois. Furthermore, the Illinois Equipment Fair Dealership Act (IEFDA) can provide a defense by excluding “retailers and wholesalers, manufacturers, and distributors of inventory” from the provisions of the IFDA, which may limit the scope of damages available to the franchisee.

In Illinois, an implied covenant of good faith is often read into franchise agreements. Breaching this covenant can create an independent cause of action. For instance, this right was found in Flynn Beverage Inc. v. Joseph E. Seagram & Sons, Inc.

A franchisor’s right to terminate the franchise can be defended if the franchisee repeatedly fails to comply with the lawful provisions of the franchise agreement. However, it’s important to note that Original Great American Chocolate Chip Cookie Co., Inc. v. River Valley Cookies, Ltd., a case that initially supported this defense, was later reversed. Also, in this case, the court stated that a franchisor’s allegedly more lenient treatment of other franchisees does not serve as a defense to a breach of the franchise agreement under Illinois law.

Lastly, it’s important to note that the success of these defenses will depend on future proceedings such as motions for summary judgment and the specific facts of the case. Therefore, dependability of these defenses is contingent upon the legal and factual research undertaken.

Types of Lawyers for Franchise Termination Cases

Franchise Law Attorneys: These lawyers specialize in the legalities specific to franchising, including franchise agreements, FTC rules, and state franchise laws. They understand the nuances of franchise relationships and can provide specific guidance.
Business Litigation Lawyers: These attorneys are experienced in handling disputes arising in a business context, including franchise terminations. They can navigate through litigation, arbitration, or mediation processes.
Contract Law Specialists: Given that franchise agreements are contracts, lawyers specializing in contract law can offer expertise in dissecting the agreement and identifying breaches or unfair clauses.

Reasons to Retain Lubin Austermuehle for Your Franchise Termination Defense

Navigating a franchise termination requires a comprehensive understanding of the legal landscape and the specific terms of the franchise agreement. Franchisees facing termination should seek legal counsel that specializes in franchise law or related fields to ensure their rights are protected and to explore all possible defenses.

In Illinois, an implied covenant of good faith is often read into franchise agreements unless there’s an express provision allowing cancellation without good cause. Breaching this covenant can create an independent cause of action. For instance, in Flynn Beverage Inc. v. Joseph E. Seagram & Sons, Inc., the court ruled that even if the franchisor acted with an improper motive, the termination would not be seen as a bad faith exercise of discretion if legitimate grounds for termination existed.

Why Choose Lubin Austermuehle for Your Franchise Termination Defense

Choosing Lubin Austermuehle for your franchise termination defense in Illinois is a decision that can significantly impact the outcome of your legal challenge. Here are the key reasons why Lubin Austermuehle stands out in handling such cases:

Expertise in Franchise Litigation: Lubin Austermuehle’s team has considerable experience in dealing with franchise litigation, including wrongful termination cases. They are well-versed in the complexities of franchise agreements and the legal landscape governing franchise relationships.
Handling a Range of Disputes: Their experience is not limited to wrongful termination but extends to other types of disputes such as breach of contract, fraud claims, and issues arising from material misstatements in Franchise Disclosure Documents (FDD). They are skilled in navigating the intricacies of these disputes, whether they involve franchisors or franchisees.
Class Action Experience: In cases where there are large numbers of franchisees affected by similar issues, Lubin Austermuehle has the expertise to handle class action suits. This is particularly valuable when dealing with franchisors who may have engaged in widespread contractual violations or misrepresentations.
Proactive Legal Strategies: When facing potential franchise termination, Lubin Austermuehle can act swiftly to try to halt the process, allowing time for franchisees to challenge the alleged grounds for termination effectively.
Recovery of Damages: They have a track record of helping clients recover damages for financial losses incurred due to wrongful termination, including lost future profits, which is a crucial aspect of such litigation.
Representation Across Multiple States: While based in Illinois, Lubin Austermuehle also represents clients in Indiana and Wisconsin, offering a broader range of service for franchisees in the region.
Client-Centric Approach: Their approach is tailored to each client’s unique situation, ensuring that your specific needs and circumstances are fully considered in developing a legal strategy.

In summary, Lubin Austermuehle’s depth of experience in franchise litigation, ability to handle complex class action lawsuits, proactive legal strategies, and client-focused approach make them a strong candidate for representing franchisees facing termination or other disputes in Illinois and neighboring states. Contact on of our franchise termination defenses attorneys at 630-333-0333 or online.