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Franchise Outlets, Franchisors and Issues of Death or Disability

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By: Lance Winslow

In a franchise agreement between a franchisor and the franchisee many potential eventualities, which may never come to pass need to be considered just in case. We know that humans do not live forever and there is a potential that a franchisee could become disabled or die.

I had considered this problem in our franchise company and luckily the issue only came up once. But it is for that reason that I added stipulations to the clause in our franchise agreement on death and disability. Below is a copy of that clause;

5.4 Death or Disability

Upon the death or permanent disability of the Franchisee, if the Franchisee is an individual or upon the death or disability of the majority shareholder, member or partner of Franchisee if the Franchisee is a corporation, limited liability company or a partnership, the spouse, adult children or estate will have the right to participate in the ownership of the Franchised Business under the terms of this Agreement for a period of one hundred eighty (180) calendar days from the date of death or disability. During that time, the spouse, adult child or estate must either:

(a) satisfy all of the qualifications for a transferee or purchaser of a The franchise, except that no transfer fee or initial franchise fee will be charged; or

(b) sell, transfer or assign the Franchised Business to a person who satisfies all of the qualifications for a transferee or purchaser of a The franchise. In addition, during such time, Franchisor may enter the Franchised Business premises and take possession of the Franchised Business, its equipment, furniture, fixtures, records, lists and supplies and continue the operation of the Franchised Business for the benefit and account of Franchisee (after paying operating expenses, including a management fee to be established from time to time in the Confidential Operations Manual) pending the conclusion of whichever of the above options is chosen by Franchisee’s spouse, adult children or estate.

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You will need to ask your franchise attorney if you are a franchisor to come up with a meaningful, fair and workable clause to address this unfortunate potential eventuality. I recommend that you do so and I can say that from personal experience as a franchisor founder. Consider this in 2006.

Lance Winslow - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs/

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