Franchise agreements are an excellent way to extend your brand into a new territory in a way that takes advantage of local knowledge and usually with reduced risk. But as recent world events have shown us, situations can arise where you may want to close down a franchise or risk reputational harm. Different brands have responded differently to the sanctions imposed on Russia. The reason for this seems to be a difference in the terms in the franchise agreements at issue. It may be that going forward, a wider range of scenarios in which a franchise can be terminated, or at least in which active trading can be suspended at the franchisor's election, are included in franchise agreements.
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Should you add the ability to terminate Franchise Agreements as a result of war, sanctions, pandemics...?
A Conservative MP has backed calls for dozens of Marks & Spencer stores across Russia to be shut immediately, suggesting Vladimir Putin is funnelling every rouble made in the country into the invasion of Ukraine. Alicia Kearns, who hosted four Ukrainian parliamentarians in the House of Commons on Thursday, said any profits generated would be tainted by the killings and war crimes committed during the conflict. Two weeks ago, M&S stopped supplying its Turkish franchisee’s businesses in Russia, which has 48 shops and 1,200 employees. However the stores remain open and continue to sell their existing stock. Some other chains that operate in Russia by franchise, such as McDonald’s, have been able to close their doors, given the agreements differ between companies.