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Fully Sick Mate

Posted by Elizabeth Gore-Jones on 8 March 2016

Or the more serious heading of "What happens if a Franchisee can no longer work due to illness or mental incapacity" also known as "fully sick mate!"

Franchisees:

1. did you know your franchise agreement may provide:

  • that if you don't run your business due to long term illness then the franchisor can terminate the franchise agreement? or
  • if you are unable to return to work because of illness then you may be required to sell the business and if you don't the franchisor may have the right to terminate the franchise agreement?

2. do you have adequate insurance to cover you for the loss you could suffer as a result of losing your business in these circumstances?

3. have you negotiated with your franchisor to allow you to engage fully trained staff to operate the business in the event that you can't?

4. do you have a plan to cover your business in the event something does happen?  I suggest you make your franchisor aware of that plan so that both parties can work together if it needs to be relied upon.

Franchisors

1. have you considered introducing a requirement that your franchisees maintain sufficient insurance to ensure they are looked after if they were to lose their business due to ongoing illness?

2. do you have plans in place to take over the operation of a franchised business, if the franchisee is unable to operate the business due to illness? 

3. do you know what your franchise agreement says in relation to the illness of a franchisee and are you ready to act quickly?

4. I suggest you require you franchisees to prepare and submit plans to cover these circumstances and at least, if the worst does happen, you will have the ability to assist in implementing that plan and aim to achieve the best outcome for all.

Conclusion

It is impossible to plan for life's curveballs,  if franchisors and franchisees work together as much as possible then any transition in the event of an illness may be minimised.  Having a documented plan can be the first step in this process.  However, it may be necessary to ensure that the parties are aware that the plan is not binding and does not vary the terms of the franchise agreement.

Disclaimer: The usual disclaimer that nobody reads that this is not legal advice and should not be relied upon, parties should seek their own legal advice for their circumstances blah blah blah

Author: Elizabeth Gore-Jones
About: Elizabeth specialises in franchising law. She lectures at Bond University PLA in franchising, she sits on the Queensland Law Society Franchising Committee, she is a past member of the Women in Franchising committee and a past member of the Franchise Council of Australia.
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Tags: Franchisee Franchisor

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