Does a Chesters franchisee have a contractual right to terminate the Franchise Agreement?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise or other agreement | Summary | |
|---|---|---|---|
| d. | Termination by franchisee | Not Applicable | You have no contractual right to terminate the Agreement. However, you have the right to terminate the Agreement on any grounds available under applicable state law. |
| e. | Termination by franchisor without cause | Not Applicable | We have no right to terminate your Agreement without cause. |
| f. | Termination by franchisor with cause | 18 and 19 of Agreement | We have right to terminate only if you breach the Agreement. |
| g. | "Cause" defined – curable defaults | 19 of Agreement | You generally have 20 days to cure all defaults that by their nature can be cured. |
| h. | "Cause" defined – non-curable defaults | 11, 18, and 19 of Agreement | Unapproved transfers and third failed in- Restaurant inspection are not curable defaults. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 35–38)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, franchisees do not have a contractual right to terminate the Franchise Agreement. However, franchisees retain the right to terminate the agreement based on any grounds available under applicable state law. This means that while the franchise agreement itself does not provide avenues for the franchisee to terminate the agreement, state laws might offer certain protections or conditions under which a franchisee can terminate the agreement without penalty. This is a fairly standard clause, as franchise agreements are governed by state law in many aspects.
In contrast, Chesters retains the right to terminate the agreement if the franchisee breaches the agreement. If the breach is something that can be fixed, the franchisee generally has 20 days to correct the issue. However, some breaches, like transferring the franchise without approval or failing a third restaurant inspection, cannot be corrected.
Prospective franchisees should be aware of the specific termination laws in their state and consult with an attorney to understand their rights and obligations. It is also important to understand what constitutes a breach of contract according to the franchise agreement, and what steps Chesters might take in the event of a breach.