The legal issues regarding franchise businesses
The franchise business structure creates a unique business relationship, and franchise law covers a number of business aspects. Essentially, a franchisor sells an existing business idea (a franchise establishment) to a franchisee who manages the business according to certain guidelines and pays a portion of the income back to the franchisor. Franchise laws are meant to establish the control, duties and responsibilities that are shared between the two parties.
A well-constructed agreement can make the difference between success and failure when you enter into such a dependant business relationship. And like any contract, a franchise agreement is lengthy and wordy, filled with unfamiliar terms and concepts. Find out how a lawyer can simplify and improve your franchise purchase and management.
The Franchise Agreement
The franchise agreement determines how the franchise business is run. The management of the entire franchise operation rests on this agreement, as it applies to each franchisee and therefore ensures that each is treated the same by the franchisor. The agreement is typically extensive, including everything from the specified territory that the franchisee operates in to the level of support that the franchisor offers the franchisee. Franchising is an appealing way to begin a business, but the nature of the relationship between the two parties can change from business to business, as can the terms of the agreement.
The franchise agreement outlines the type of contract and provides guidelines for operations, including matters surrounding trademarks, marketing procedures and ongoing maintenance. This agreement is not necessarily set in stone; there may be some room for negotiation, which can work out to the franchisee's benefit with the help of a franchise lawyer.
How a Franchise Lawyer Can Help
Not all franchise opportunities are created equal, and it can be difficult to know how to negotiate an attractive contract if you're new to the franchise structure. An attorney can explain the franchising information in the Uniform Franchise Offering Circular that you'll receive before you discuss the agreement, as well as ensure that all fees are reasonable and clarified in writing. A negotiable contract brings potential for a good deal, but you'll need the expertise of an experienced lawyer who knows what terms the franchisor will be likely to adjust.
Once the franchise is sold, legal issues can arise when one side doesn't hold up their end of the deal. If either side is incompetent or particularly inconsiderate of the other, a court case is likely to follow. To prevent this situation from occurring, there are both federal and state laws that regulate franchise rights, agreements and pre-sale disclosure laws; a franchise lawyer can recognize reasonable terms and familiar practices, and make any adjustments to help you avoid the expense of litigation down the road.