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The pros and cons of being the first franchisee

On Behalf of | Feb 27, 2022 | Franchise Law |

Maybe you’ve been tossing around the idea of opening a restaurant. Then you learn that one of your neighborhood’s most popular eateries is becoming a franchise and advertising for franchisees. You’d be their first franchisee – or at least one of the first.

Is that a good idea? Does being the first franchisee come with advantages or with higher risks than if you joined a well-established franchise operation? It comes with both. One of the key questions to ask yourself is whether it’s right for you.

Are you the right kind of person for this challenge?

Being the first franchisee means being able to accept risk. You’re jumping into this thing along with the franchisor as your partner. That means your operation will get more scrutiny – and likely more support – than subsequent franchisees will receive.  The franchisor likely sees their success as dependent on you.

As the first franchisee, you have to expect the unexpected and be willing to be a guinea pig of sorts. Some things you try will work and others won’t, so you have to be flexible and open to change. You also have to be willing to tell the franchisor if they’re setting unrealistic expectations. Remember that they’re still in the learning phase as well.

Getting a fair franchise agreement

You’ve decided you’re the right kind of person to take on this unique challenge. When you get to the point of negotiating the franchise agreement, you need to make sure that it takes into consideration all of the extra work that will be required of you because systems and processes may not be well defined. Further, you won’t have other franchisees’ experiences to learn from.

Don’t let the franchisor convince you that you are getting benefits by having more franchisor support that can replace fair compensation. They’re going to be learning a lot from this initial operation as well.

Since you’re embarking on a whole new career in a brand new franchise, you need to have a solid franchise agreement to protect your interests. Having experienced legal guidance as you negotiate the agreement can make a big difference.