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What to know before buying a franchise

On Behalf of | Mar 3, 2021 | Franchise Law |

Buying a franchise is a popular way to get into business ownership. Many entrepreneurs in Florida know that it can be easier to start off when they have a name that consumers recognize. Choosing what company to franchise with is a big decision, so it’s a good idea to read the franchise agreement carefully when making the choice.

Understanding franchise agreements

Franchisees are the people who enter into a relationship with an existing company. The franchisor is the company with the recognizable name, reputation and approach to business that the franchisee likes. In a franchise relationship, small business owners are able to use the franchisor’s intellectual property, training procedures and other materials. They receive advertising support from the franchisor. In exchange for these benefits, they enter into a long-term arrangement and agree to pay fees to the franchisor.

Franchise agreement documents are complicated and long. Some contain as many as 30 pages before addenda. The franchisor also must provide a Franchise Disclosure Document to anyone interested in becoming a franchisee. This is mandated by the Federal Trade Commission. Under the Franchise Rule, this organization is largely responsible for regulating the way American franchises work.

Getting legal assistance

Franchise law can be complicated. It’s a good idea to speak with a lawyer before signing any franchise agreement. Sometimes, the parties in that document agree to very specific processes that can limit their options. For example, under the terms of most franchise agreements, the parties agree to arbitration when disputes arise. This is a very different option from civil suits or mediation. Potential franchisees need to understand their rights and responsibilities clearly before signing complex legal documents.