The success of franchise systems is highly dependent upon the proper functioning of trademark enforcement. It is essential that when franchisees are not operating in accordance with standards and are not meeting their financial obligations, the franchisor have the right to terminate the franchise and enforce post-termination obligations of the former franchisee. In its franchise agreement, the franchisor typically has been granted, upon termination of the franchise relationship, the right to demand, among other things, that the franchisee de-identify, not compete, assign the phone number of the former franchisee to franchisor, and the return of its confidential operating manuals. Yet what happens when the franchisee refuses to comply with these obligations?
There are numerous judicial precedents and legal articles written about what a franchisor should provide in its franchise agreements to protect itself when a post-termination situation arises. If the franchisor does not take action when the franchisee fails to comply, the franchisor’s failure to protect its marks could lead to the loss of those marks and the legal rights that accompany their ownership. Moreover, failure to enforce post-termination obligations of a former franchisee can lead to chaos in the franchise system.
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