What a franchise default notice states, and what to look for in yours

The parts a default notice normally covers according to franchise lawyers and the FTC, and why the notice and your own agreement set your dates.

A default notice is the franchisor's written statement that it believes the franchisee has broken the franchise agreement. Franchise lawyers writing on the International Franchise Association (IFA) website say a well-prepared notice should cite the section of the franchise agreement, list the facts, and "specify exactly what is required for a cure." They add that "the notice must provide the appropriate cure period, whether dictated by the franchise agreement or by state statute." That is the view of two private lawyers writing from the franchisor side, not a rule of law.

Your own notice and your own franchise agreement control your dates and your rights. This page describes what the sources say notices contain. It cannot tell you what yours means. For a checklist of questions to hold up against a real notice, see check your notice.

The parts to look for

  • The contract provision the franchisor says was broken, and the facts it relies on.
  • Whether the franchisor calls the default curable or not. The IFA article says that if a default is non-curable, "the notice should explicitly state that fact."
  • What a cure would require and how long the notice gives to do it.
  • The effective date of any termination, and the stated delivery method and address for notices. IFA presentation slides list these as the provisions that govern a default: the basis for default, the cure period, the effective date, and notice requirements such as hand delivery, courier, certified mail or email.

Where the contract and the law meet

Franchise agreements are the starting point, but some states add their own notice rules. Washington's statute, for example, speaks of written notice and a reasonable opportunity to cure that "in no event need be more than thirty days." New Jersey requires "written notice setting forth all the reasons" for termination at least 60 days ahead, with short exceptions. Wisconsin's statute, read from a mirror of the statute (check the official text), calls for at least 90 days' notice stating all reasons and 60 days to rectify. These are examples, not a general rule: many states have no such statute. See state franchise relationship laws.

The Third Circuit has treated a notice letter as meeting New Jersey's written-notice requirement where it set out the clause breached and the facts (a decision marked not precedential). That case concerned a contract-defined fraud default and the excerpt read does not discuss a cure period, so it shows only that courts look at what the letter actually says.

Finding the same terms in the disclosure document

The franchisor's disclosure document (FDD) has an Item 17 table with separate rows for termination with cause, "cause" defined as curable defaults, "cause" defined as non-curable defaults, and franchisee obligations on termination. The rule that sets out Item 17 tells readers to read the actual provisions in the attached agreements, because the table is only a summary. See Item 17 of the FDD.

The FTC's consumer guide notes that many franchise contracts give a chance to "cure" an occasional failure to comply, such as one late payment, while keeping the right to terminate for other failures. For what to collect once a notice arrives, read documents to gather after a default notice. A lawyer licensed in your state can advise on your own dates.

Where this came from

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Check your notice