Richard L. Rosen, a New York-based franchise attorney, with over 35 years of experience, shared how he helps his clients negotiate their franchise terms:
You need your franchise attorney to review your franchise agreement before you sign it. You’ll also need him or her to conduct a complete review of the FDD. Some franchisors will gladly share their FDD with you right away, while others withhold it until they’ve qualified you as a serious candidate for franchise ownership. Note that they must, legally, provide the FDD no later than your first in-person meeting.
Right of first refusal: If a franchisee decides to sell a franchise unit, the franchisor has the option of buying it back themselves or allowing a new owner to buy it and take over operations. In some cases, the franchisee is tasked with finding a new buyer, which the franchisor then needs to approve before final sale.
This is because franchisors don’t want to give one franchise owner more preferable terms than another, which could create dissent and resentment within the system.
Franchise territory: Most franchise systems offer franchisees an exclusive territory. This may be outlined as a certain distance from your business address, for example, a specific city or county or some other delineation.
Prior to meeting with him or her you should review the documents on your own and prepare questions and concerns for your meeting. Don’t worry if some parts of the FDD don’t make sense to you. FDDs usually contain an extensive amount of “legalese” that your franchise lawyer will help to put into layman’s terms.
This means that, if mediation is unsuccessful, the franchisee may not have much time to properly file suit or may run out of time to do so . It is important to ensure that the statute of limitations and mediation requirements do not conflict.
An experienced franchise lawyer can explain important provisions of the franchise agreement. A franchise lawyer may also be able to point out unusually harsh or one-sided provisions that are not common in the industry. An experienced attorney will understand what to look for in the Franchise Disclosure Document, and can identify red flags. Also, the attorney may know of common law and state laws that protect franchisees. Knowing key points before signing could save you from making a big mistake.
Each franchisee selects its own site. However, the franchisor typically has the right to approve the location.
The FTC Rule imposes strict disclosure requirements on franchisors in the form of a Franchise Disclosure Document (FDD) that must be delivered to a prospective franchisee.
A license simply means one party gives permission to another party to do something or use something of value. In the case of franchising agreements, this means: The franchisor licenses to the franchisee the right to use the franchisor’s intellectual property, systems and brand.
Franchise Agreement: 20 Important Things to Know. A franchise agreement is a legally-binding contract between the parties to a franchise relationship. In order to take ownership of a franchise as the franchisee, you sign a franchise agreement. A franchise agreement protects both sides. It protects you as the franchisee and also protects ...
In order to take ownership of a franchise as the franchisee, you sign a franchise agreement. A franchise agreement protects both sides. It protects you as the franchisee and also protects the franchisor brand. When buying a franchise you will be making a large financial investment. A signed agreement gives you rights to help safeguard your ...
The copy must be attached to the FDD and delivered a minimum of 14 days before entering into a binding contract. This gives you time to review and discuss the agreement with an attorney.
A franchise lawyer could help you understand the legal and business planning steps involved with creating a franchise. Once retained, your business local franchise attorney could combine their experience with your personal goals to create a franchise plan that fits your needs.
The creation of a franchisor-franchisee relationship takes the form of a contract. Known as the franchise agreement, this document outlines the responsibilities of each party.
The next step is to create a franchise disclosure document—one of many tasks a business franchise attorney could assist with—outlining the general terms of the relationship. This gives the franchisee an opportunity to negotiate terms, consult with their own legal counsel and discuss plans with an accountant.
We love entrepreneurs because we are entrepreneurs . Your spirit, drive, and motivation are what set you apart from the 9-5 masses. Franchising your business is, frankly, a great way to turn your business into a money-making machine. Our franchise law firm regularly works with small businesses in developing their brand and operation as well as teach them how to franchise so that they are positioned to take this step when the time is right.
Creating a franchise involves many complex legal steps, the first of which is seeking a federal trademark or patent to give the inventors of a product or process the legal right of ownership over that property.
Our franchise attorneys are based in Charlotte, North Carolina, and represent clients nationwide who are ready to help you with legal franchise services and business planning steps involved with creating a franchise.
It is essential to remember that franchisees are still independent business owners, meaning they make the ultimate decisions concerning hours of operation, hiring choices, and how to market their products. Furthermore, unless the master franchise agreement specifically states otherwise, franchisees are solely responsible for any profit or loss generated by the franchise. A franchise attorney in this area might be able to provide more information about the important relationship between franchisors and franchisees and other legal franchise services.