What constitutes 'good cause' for Best Western to terminate a franchise agreement early?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
- The "Summary" sections of Item 17(v), entitled Choice of Forum, of the Membership Agreement charts in the Disclosure Document is amended by adding the following:
To the extent required by the North Dakota Franchise Investment Law, Member may bring an action in North Dakota.
- The "Summary" sections of Item 17(w), entitled Choice of law, of the Membership Agreement charts in the Disclosure Document is amended by adding the following:
Except for Federal Arbitration Act and other federal law, North Dakota law governs.
VIRGINIA
In recognition of the restrictions contained in Section 13.1-564 of the Virginia Retail Franchising Act, the "Summary" section of Item 17(h), entitled "Cause" defined – non-curable defaults, is amended by adding the following:
Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any grounds for default or termination stated in the membership agreement does not constitute "reasonable cause," as that term may be defined in the Virginia Retail Franchising Act or the laws of Virginia, that provision may not be enforceable.
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to the 2025 Best Western FDD, the definition of 'good cause' for termination of a franchise agreement is not explicitly detailed in the provided excerpts, but is subject to state laws, specifically in Virginia and Washington. In Virginia, the Retail Franchising Act stipulates that it is unlawful for a franchisor to cancel a franchise without 'reasonable cause'. The FDD clarifies that if any grounds for default or termination stated in the membership agreement do not constitute 'reasonable cause' as defined by Virginia law, that provision may not be enforceable. This means Best Western must adhere to Virginia's legal definition of 'reasonable cause' when terminating a franchise agreement in that state.
In Washington, the Washington Franchise Investment Protection Act (Chapter 19.100 RCW) may supersede the Best Western membership agreement, particularly in areas of termination and renewal. Additionally, court decisions in Washington could also override the agreement in these areas. This implies that Best Western's ability to terminate or not renew a franchise in Washington is heavily influenced by state law and judicial precedents, potentially offering more protection to franchisees.
For prospective Best Western franchisees, it is crucial to understand the specific state laws governing franchise terminations, especially in states like Virginia and Washington, as these laws can significantly impact the terms and conditions under which Best Western can terminate a franchise agreement. It would be prudent for potential franchisees to seek legal counsel to fully understand their rights and obligations under both the franchise agreement and the relevant state laws. Furthermore, franchisees should inquire with Best Western about specific instances or examples that would constitute 'good cause' for termination in their particular state to gain a clearer understanding of the franchisor's expectations and potential risks.