What happens if a Ledgers franchisee has declining revenue for two consecutive years?

According to Ledgers's 2025 Franchise Disclosure Document, continuation of a franchisee's territorial rights depends on achieving a certain sales growth. If a Ledgers franchisee experiences declining revenue for two consecutive years, which Ledgers defines as 'Minimum Requirements,' Ledgers reserves the right to establish a company-owned outlet selling similar goods or services under similar trademarks or service marks. A year, in this context, includes each fiscal year (including any partial year) ending on December 31.

This stipulation means that a Ledgers franchisee's performance is directly tied to their continued territorial rights. Failing to maintain sales growth puts the franchisee at risk of direct competition from a company-owned outlet within their territory. This is a significant risk, as the introduction of a company-owned outlet could further erode the franchisee's revenue base.

This type of performance-based clause is not uncommon in franchising, as franchisors seek to ensure that franchisees are actively developing their territories and upholding brand standards. However, the specific consequences for failing to meet minimum requirements can vary. Some franchisors might offer additional support or require performance improvement plans before taking more drastic action. The Ledgers FDD indicates a more direct approach, where the franchisor reserves the right to establish a competing outlet.

Prospective Ledgers franchisees should carefully consider the implications of this clause and assess their ability to consistently grow revenue within their territory. Understanding the factors that could impact sales, such as local market conditions and competition, is crucial. It would also be prudent to discuss with existing franchisees their experiences with meeting sales targets and how Ledgers supports franchisees in achieving those goals.