In these socially and economically trying times, franchisees may find themselves between a rock and a hard place. When the vast majority of US states have ordered only essential businesses to remain open, some franchisees are forced to close their doors to customers.

However, both the franchisor and landlord may still want the franchisee to continue paying them according to the obligations set out in the franchise agreement and lease agreement.

If you Can’t pay franchisor in this type of situation, the franchisee may be unable to pay its franchisor or its commercial lease. Contractually, the franchisee may have a way to move forward without going bankrupt.

Most franchise agreements and lease agreements have a force majeure or acts of god clause in the agreement that are for occasions such as pandemics. While determining whether this pandemic constitutes a force majeure depends on the exact language of the contract, and why having a legal expert review your agreement is necessary.

Having a force majeure clause gives the franchisee some leverage in negotiations with both the franchisor and landlord. This is why hiring an experienced franchise attorney is essential because he/she can act on your behalf to negotiate an interim period where the franchisor may decrease the number of royalties paid, and the landlord may lessen the rent that is paid.

After all, it is in both the franchisor’s and landlord’s financial interest to have the franchisee financially solvent and not bankrupt.

Please contact franchise attorney Mario L. Herman for more information on how to negotiate a temporary relief of your contractual obligations.