Washington franchise termination law: good cause and the 30-day cure limit

What chapter 19.100 RCW says about good cause, a cure period that need never exceed 30 days, exceptions, non-renewal, remedies and waivers.

What the statute says about good cause and cure

Under RCW 19.100.180, the parties must deal with each other in good faith, and terminating a franchise before the end of its term other than for good cause is an unfair or deceptive act and a violation of the chapter. Good cause includes failure to comply with lawful material provisions of the franchise or other agreement, and to cure after written notice and a reasonable opportunity to cure, which in no event need be more than 30 days (RCW 19.100.180(2)(j)).

The statute states a ceiling on what a reasonable cure period needs to be, not a fixed number of days a franchisor must give. It does not say how many days of notice precede termination. Read the notice and the agreement for the days that apply to a given franchise; a Washington lawyer can advise on them.

If a default cannot be cured in 30 days

The same paragraph deals with slower fixes. If a default cannot reasonably be cured within 30 days, good cause can arise from the franchisee failing to initiate, within 30 days, substantial and continuing action to cure it. So the 30 days can become a deadline to start work and not to finish it. For how cure periods work in general, see franchise cure period explained.

When no notice or cure is required

A franchisor may terminate without prior notice or an opportunity to cure if the franchisee is adjudicated a bankrupt or insolvent, makes an assignment for the benefit of creditors, voluntarily abandons the franchise business, or is convicted of or pleads guilty or no contest to a charge of violating any law relating to the franchise business.

There is also a repeat-breach rule. After three willful and material breaches of the same term of the franchise agreement within a 12-month period, each with notice and an opportunity to cure, the franchisor may terminate on any later willful and material breach of the same term within that 12-month period without notice or cure. See cross-default and repeated default.

Coverage

Chapter 19.100 RCW defines a franchise by the grant of a business right tied to a mark plus a franchise fee. A sale is treated as made in Washington when, among other triggers, the franchise business is to be located or operated, wholly or partly, in the state (RCW 19.100.010 and 19.100.020). Whether a reader's franchise meets the definition is for the reader or a Washington lawyer to check. This page gives no verdict.

Inventory buyback and non-renewal

On a termination for good cause, the franchisor must buy the franchisee's inventory and supplies at fair market value at the time of termination. The statute lists exclusions (personalized materials, items not reasonably required, and certain items not bought from the franchisor if the franchisee keeps the premises) and gives the franchisor a right of offset.

For non-renewal, refusing to renew without fairly compensating the franchisee for the fair market value of inventory, supplies, equipment, furnishings and goodwill is prohibited. Goodwill compensation is not required if the franchisee received one year's notice of non-renewal and the franchisor agrees in writing not to enforce a non-compete (RCW 19.100.180(2)(i)). Compare post-termination non-competes.

Remedies, and what this page has not confirmed

A violation of RCW 19.100.180 is an unfair or deceptive act under chapter 19.86 RCW. RCW 19.100.190 allows a franchisee to sue for actual damages, the court may increase the award to up to three times actual damages in its discretion, and the prevailing party may recover costs including a reasonable attorneys' fee. Subsection (2) of that section, as quoted on the page, speaks of persons who sell or offer to sell a franchise in violation of the chapter, so a lawyer should confirm how the section applies to a termination.

RCW 19.100.210 lets the Attorney General or the director of financial institutions sue to restrain prohibited acts. The section as read gives a franchisee no injunction clause of its own. This page has not confirmed a private limitation period; none was found in the sections read.

Waivers and forum

Any agreement or provision, including a choice-of-law provision, that purports to bind a person to waive compliance with the chapter is void, and the chapter represents a fundamental policy of Washington (RCW 19.100.220). A release in a negotiated settlement of a bona fide dispute by a franchisee represented by independent counsel is not barred. The section does not expressly mention forum-selection clauses. See forum-selection clauses.

Questions to look for in your own notice and agreement

Does the notice say what the default is and give a number of days to fix it?
Could the default reasonably be fixed in 30 days, and does the notice say what counts as starting a cure?
Does it rely on bankruptcy, abandonment, a conviction or a repeat breach to skip the cure period?
Does the agreement say what happens to inventory and supplies on termination?
If this is a non-renewal, how long before expiry was notice sent?
Does the agreement choose another state's law or a forum outside Washington?