It is not uncommon for disputes to arise between a franchisor and a franchisee. If a franchisor and franchisee are unable to resolve their issues and disputes, a franchisor may wish to terminate the franchise agreement of the franchisee. Prior to deciding whether or not to declare a default and terminate a franchise, the franchisor should carefully review the specific terms and provisions of the franchise agreement related to events of default and termination.
In addition to the specific provisions of the franchise agreement, the franchisor must be aware of applicable state laws that set forth specific requirements for the termination of a franchise. In 19 states, Puerto Rico and the Virgin Islands there are specific laws that govern the termination of a franchise relationship by the franchisor. Most franchise termination laws require the franchisor to have “good cause” to terminate the franchisee. What constitutes good cause varies from state to state. Accordingly, the franchisor needs to determine which state laws apply and what each law requires.
Ohio does not have a statute of general applicability to the termination of a franchise agreement by a franchisor. Ohio does, however, have certain specific statutes governing termination of wine and beer distributorships and new motor vehicle dealerships.