Nonrenewal or Modification of Franchise Agreements

  1. Law
  2. Tennessee Code
  3. Commercial Instruments and Transactions
  4. Trade Practices
  5. Franchise Terminations, Nonrenewals or Modifications
  6. Nonrenewal or Modification of Franchise Agreements

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No franchisor may fail to renew a franchise unless such franchisor provides the franchisee at least sixty (60) days' prior written notice of its intention not to renew, such failure to renew is for good cause, and the franchisor has provided written notice of the facts and circumstances upon which it alleges that good cause exists to fail to renew. Any modification of an existing franchise agreement proposed by a franchisor must be disclosed no later than sixty (60) days prior to the proposed effective date of the modification unless the franchisee consents, in writing, within the sixty-day period, to waive such requirement. If failure to renew is for good cause, such nonrenewal may not be effective unless:

  1. During the sixty (60) days prior to expiration of the franchise, the franchisor permits the franchisee to sell the business or a portion thereof relating to the franchisee, to a purchaser meeting the franchisor's then current requirements for granting new franchises, or, if the franchisor is not granting a significant number of new franchises, the then current requirements for granting renewal franchises;
    1. The refusal to renew is not for the purpose of converting the franchisee's business premises to operation by employees or agents of the franchisor for such franchisor's own account; provided, that nothing in this subdivision (2)(A) shall prohibit a franchisor from exercising a right of first refusal to purchase the franchisee's business; and
    2. Upon expiration of the franchise, the franchisor agrees not to seek to enforce any covenant of the nonrenewed franchisee not to compete with the franchisor or franchisees of the franchisor;
  3. The franchisee and the franchisor agree not to renew the franchise; or
  4. The franchisor withdraws from distributing the products or services through franchises in the state of Tennessee for a period of not less than two (2) years; provided, that:
    1. Upon expiration of the franchise, the franchisor agrees not to seek to enforce any covenant of the nonrenewed franchisee not to compete with the franchisor or franchisee of the franchisor; and
    2. The failure to renew is not for the purpose of converting the business conducted by the franchisee pursuant to the franchise agreement to operation by employees or agents of the franchisor for such franchisor's own account.


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