Underneath the Golden Boy - Robson Hall Faculty of Law

328 Underneath the Golden Boy
capricious when compared to the actions of the franchisor in other similar
circumstances. 111 The Act provides the franchisee with the opportunity to cure
the alleged default after receiving written notice stating the basis for the
proposed termination. The Act also includes an exemption for termination
without providing the franchisee the opportunity to cure, such as when the
franchisee or the business to which the franchise relates is declared bankrupt. 112
The length of time a franchisor will grant a franchisee to cure an alleged
default is an essential matter pertaining to termination of a franchise agreement.
Iowa’s legislation states that after service of notice, the franchisee shall have a
reasonable period of time to cure the default, which in no event shall be less
than 30 days and no more than 90 days. 113 In contrast, Australia’s Trade
Practices Act 1974 states that the franchisor must allow the franchisee a
reasonable time to remedy the breach. A “reasonable time” is however limited by
the subsequent section to no more than 30 days. 114 Similarly, the California
Franchise Relations Act requires that a franchisee’s reasonable opportunity to
cure the failure should not exceed 30 days. 115
Manitoba should follow Australia and California’s example in setting a 30-
day limit. Iowa’s limit of 90 days appears to be an excessive time in which to
require a franchisor to endure a defaulting franchisee. Adopting a shorter limit
will induce a franchisee to cure the default faster, to the franchise’s benefit, and
shall have no detrimental effect on the franchisee. In addition, Manitoba could
introduce an exception to this limit when the parties initially agree to a longer,
but never shorter, period through the franchise agreement. To provide a further
incentive for a franchisee to comply, the termination clause in a franchise
agreement should be statutorily required to include a liquidated damages section,
whereby a franchisor establishes what a franchisee will have to pay in
compensation in case of failure to remedy the default. Non-compliance with the
request to cure the default should render the contract void, allowing the
franchisor to sell the franchise to other potential franchisees.
It is important to note that Iowa’s legislation covers the termination by a
franchisor in instances where the franchisee is in default. What happens when
the franchisor simply wants to terminate the contract for no particular reason
Manitoba should introduce a section addressing this issue as well. In doing so,
111
Ibid.
112
Ibid. at §523H.7.2 and §523H.7.3.
113
Ibid. at §523H.7.2.
114
Australia, Trade Practices (Industry Codes – Franchising) Regulations 1998, supra note 48 at
ss. 21(2)(c) and 21(3).
115
Cal. Bus. & Prof. Code §20020.