Under what conditions can Learningrx terminate a franchise prior to its expiration?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
r, general partner or controlling shareholder. Such representative shall have the authority to speak for and bind Franchisee in all matters pertaining to this Agreement, and all matters relating to the Business. Further, if Franchisee is an entity, such entity shall engage in no business other than the operation of the Business governed by this Agreement.
3. TERM AND RENEWALS
- 3.1 Term of Agreement. This Agreement begins on the date executed by both parties and will continue for a period of ten (10) years, unless earlier terminated as provided under this Agreement.
- 3.2 Rights Upon Expiration. At the end of the term of this Agreement, Franchisee may request a renewal term ("Renewal Term") for one (1) successive period of ten (10) years, provided Franchisor does not exercise its rights of refusal as set forth in Section 3.3 below.
- 3.3 Right of Refusal to Grant Successor Term. Franchisor may refuse, in Franchisor's sole discretion, to grant Franchisee's request for a Renewal Term if Franchisee:
- (a) fails to remedy, in the time frame set forth in this Agreement, any breach of this Agreement specified by Franchisor in a written notice;
- (b) has committed two (2) or more material breaches of this Agreement in the preceding twelve (12) months prior to expiration;
- (c) fails to give notice of Franchisee's intent to renew at least six (6) months, but no more than twelve (12) months, prior to the expiration of this Agreement. Failure to give timely notice will be considered an election not to renew this Agreement; or
- (d) is not current in payment obligations to Franchisor or its subsidiaries and affiliates and to trade creditors, landlords, or mortgage holders at the time Franchisee delivers its notice of renewal or on the date this Agreement is scheduled to expire unless Franchisee has a legitimate basis to dispute the claims of such persons and has made adequate reserves therefore.
- 3.4 Renewal Franchise Agreement. Franchisee must execute Franchisor's then-current form of franchise agreement and ("Renewal Franchise Agreement") all other legal agreements for new franchisees. The Renewal Franchise Agreement may vary in material aspects from this Agreement, including, but not limited to, higher royalty and advertising fees. The Renewal Franchise Agreement shall contain a right to renew the Renewal Franchise Agreement for at least one (1) successive ten (10) year period. Franchisee must also make capital expenditures that are reasonably required for the renovation and modernization of the Center, signs, vehicles, or any other required equipment to reflect the then-current image of Franchisor.
- 3.5 Renewal Franchise Fee. Upon signing a Renewal Franchise Agreement, Franchisee will not be required to pay another Initial Franchise Fee but will be required to pay the then-current Renewal franchise fee.
3.6 Interim Period. If Franchisee does not sign a new Franchise Agreement prior to the expiration of this Agreement and continues to accept the benefits of this Agreement after the expiration of this Agreement, then at the option of Franchisor, this Agreement may be treated either as (i) expired as of the date of expiration with Franchisee then operating without a franchise to do so and in violation of Franchisor's rights; or (ii) continued on a month-to-month basis ("Interim Period") until one (1) party provides the other with written notice of such party's intent to terminate the Interim Period, in which case the Interim Period will terminate thirty (30) days after receipt of the notice to terminate the Interim Period. In the latter case, all obligations of Franchisee shall remain in full force and effect during the Interim Period as if this Agreement had not expired, and all obligations and restrictions imposed on Franchisee upon expiration of this Agreement shall be deemed to take effect upon termination of the Interim Period. In addition, Franchisee acknowledges that Franchisee is obligated to pay the Interim Period Fee (as defined below) for each month during any Interim Period. The Interim Period Fee will be in addition to all other fees and costs payable by Franchisee pursuant to this Agreement.
4. TERRITORY
- 4.1 Location. Franchisee may operate the franchised Business only at the Premises as designated in Attachment I to this Agreement. Franchisee may not relocate the Premises without Franchisor's prior written approval, which may be withheld for any reason. Franchisee must maintain a physical location for the Center at all times.
- 4.2 Territory. During the term of this Agreement and any extensions, neither Franchisor nor its affiliates will own, operate or franchise a fixed location for the operation of any other Center within your Territory as designated in Attachment I to this Agreement.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
The 2025 Learningrx Franchise Disclosure Document states that the standard agreement lasts for ten years unless terminated earlier. The document outlines conditions under which Learningrx may refuse a renewal term, which effectively ends the franchise relationship. These conditions include failure to remedy a breach of the agreement, committing two or more material breaches within the 12 months before expiration, failing to provide timely notice of intent to renew (at least six months, but no more than twelve months before expiration), or not being current on payment obligations to Learningrx, its subsidiaries/affiliates, trade creditors, landlords, or mortgage holders, unless there's a legitimate dispute and adequate reserves.
Additionally, the Learningrx franchisee has an early termination option. Beginning three years after the agreement date, a franchisee can terminate the agreement with 60 days' prior written notice if the business has a negative Net Operating Income on a cash basis, verified by a Certified Professional Accountant approved by Learningrx, over any aggregated twelve consecutive month period during the term. If the franchisee exercises this option in strict compliance with the terms, Learningrx agrees to waive its right to seek lost future profits, lost future royalty fees, and/or lost future marketing/advertising fees.
However, Learningrx retains the right to pursue the franchisee for any and all other damages, such as monies owed prior to termination, damages from conversion of customers, trademark damages, reputational damages, or damages from failure to provide paid services or refunds. In Virginia, it is unlawful for Learningrx to cancel a franchise without reasonable cause, and any grounds for default or termination stated in the Franchise Agreement that do not constitute "reasonable cause" under Virginia law may not be enforceable. Similarly, Learningrx cannot use undue influence to induce a franchisee to surrender any right given under the franchise, and any provision involving such undue influence may not be enforceable.