My Franchisor Dissolves the Company....

[Matt Wade]

I became a franchisee back in 2005 and traded that brand for the past 7 years ,
I showed great loyality to the franchisor and built my business even though I was never given a operations manual, ongoing support, nor any business training.
Communication from the franchisor was small, and I only received sporadic text messages saying “Hi” or “Happy Christmas” in fact I hadn’t spoken directly to the franchisor for nearly 4 years from 2008.

Unbeknownst to me the franchisor dissolved the company I had the franchise agreement with in June 2010, I continued paying the franchise fees unaware for over a year and stopped paying in August 2011. And had No contact from them.

Since then I had stopped trading that brand name and began trading under my own name.

In July 2012 the franchisor makes contact and says he has noticed that there is no payments made and starts demanding unpaid fees, and says that the old franchise company (now dissolved) had assigned the agreement to his new ltd company back in 2010. And if it does not receive any money they will enforce termination consequences under that agreement.
He hasn’t produced a valid assignment.

In the Franchise agreement there is a clause below which states.

23. ASSIGNMENT BY FRANCHISOR

23.1 THE Franchisor may assign or otherwise deal with the benefit and burden of the whole or any part of this Agreement, without any consent from the Franchisee, and in the case of an assignment, it will procure that the assignee enters into a direct covenant with the Franchisee

23.2 The submission by such assignee of a direct covenant with the Franchisee to observe and perform all the Franchisor’s obligations contained in this Agreement after such assignment shall release and discharge the Franchisor from all obligations under this Agreement.


There was never any direct covenant, and the franchisor and assignee are the same person
Can someone please shed some light on this technical situation?
Because it seems to me that a franchisor can neglect, twist, turn and believes it has full rights
even when its wrong!
And a franchisee has no rights.

 

[Suzuki]

and the franchisor and assignee are the same person

No they're not, they're two limited companies.

I think what you are asking is way beyond the scope of what people can help you with for free on a public internet forum, you really need to get professional help asap. You should be able to get an hour free which will give you an idea of where exactly you stand.

 

[moduslegal]

This is a tricky one. I think my initial thought would be what the term of your franchise agreement was - they are normally for 5 or 7 years, so your term may have expired naturally.

If the old franchisor was dissolved back in June 2010 and you kept making payments to the same bank account for another year, then I suppose those payments should be held in bona vacantia - property of the Crown. It would be interesting to contact the Crown solicitor and ask for the return of those monies.

I think if I were going to do battle with this guy I would do so on the basis that, since you found out the old franshisor was dissolved yourself and had no contact from the franchisor, you were entitled to treat the contract as frustrated and therefore terminated automatically.

These are just some thoughts. Unfortunately, Franchise Agreements are extremely one-sided in favour of the franchisor. Like Suzuki says, if you are expecting to deal with this using free legal advice you probably aren't going to get very far. Having said that, if you want to establish contact with me via private message, then let me have a copy of the franchise agreement to look at, I do offer a free 15 minute telephone consultation which you are welcome to use.

I have to say though, either this guy is a chancer, in which case a well written solicitors letter should fend him off, or he is determined, in which case you are likely to be entering an expensive legal war zone. I think it really depends on how much he is chasing you for.

Hope that helps. James