Franchisee Opt-Out 2025: Skipping Disclosure and Cooling-Off Periods

Under the updated franchise regulations effective in 2025, franchisees renewing or extending agreements can opt out of receiving disclosure documents and cooling-off periods. This change benefits both franchisors and franchisees by reducing delays. Here’s how it works and what to consider.

Franchisees can opt out if:

• They are renewing or extending a franchise agreement that is the same or substantially the same as the previous agreement.
• The business operated remains the same or substantially the same as before.

To qualify, the franchisee must provide written notice to the franchisor opting out of the disclosure requirement.

This exemption is a win for franchisors and franchisees, addressing frustrations over lengthy disclosure periods and renewal delays. However, the new agreement must be substantially unchanged from the original. With a typical 5-year gap between agreements, franchisors should assess if significant amendments have occurred, as this could affect eligibility. The onus is on the franchisor to ensure the agreements are substantially the same. If the franchisor does not disclose (even if requested by the franchisee) and there is a substantial difference, then the franchisor may incur a penalty of up to $198,000.

Navigating the opt-out process requires careful review of your franchise agreement. The Franchise & Business Lawyers can assist in ensuring compliance and streamlining renewals. Contact us today for expert support.