The USA franchise lawyer has to have
broad knowledge of franchise laws in different states and how they affect
people who want to buy or sell a franchise. If you are considering going into
business by buying a franchise, working with a franchise lawyer from the
beginning will help you understand the many responsibilities you will have as a
franchise owner, and can prevent costly mistakes.
Capital Investment and Your Interests
Are Key
Before choosing a franchise, you must
fully understand what level of capital investment you can make. The cost of
buying a franchise varies tremendously, and you want a franchise that is
reasonable for your financial situation. Also, you should choose a franchise
that speaks to your interests. You will be spending considerable time running
your franchise, so it's important that you choose one that aligns as well as
possible with what you like to do.
The Franchise Application
When you choose a franchise, you will
have to complete a franchise application, which may ask for credit and
background information and see if you meet criteria set forth by the
franchisor. Franchisors must provide potential franchisees a Uniform Franchise
Offering Circular (UFOC) containing information about the franchise's history,
finances, contracts, and requirements. Having a franchise lawyer review the
UFOC with you is wise.
Franchisor Standards of Conduct
Franchisors are required under the law
to act fairly and "with good cause." They must follow standards in
the event of termination, non-renewal and changes in competitive circumstances.
The specifics of these laws vary from state to state, and that is another
reason to work with a franchise lawyer starting as soon as you decide to buy a
franchise.
Why It's Smart to Check out Franchisee
Law Firms
Franchisee law firms help potential
franchise owners understand their obligations and requirements in order to buy
a franchise. They can explain confusing terms in the UFOC and make sure you
understand any and all contracts you sign with a franchisor. And, should the
franchisor try to terminate your franchise improperly, your franchise lawyer
will have your back and help you ensure you exhaust all avenues of recourse.
Franchisee lawyers focus attention on
Item 19 in franchise disclosure documents (FDDs) which covers financial performance.
While not all franchisors provide Item 19 disclosures, a growing percentage of
them do, probably to help them stand out against other franchises competing for
buyers. Whether or not your franchisor includes Item 19 disclosures, your
franchisee attorney will demand clarity about earnings.
Becoming a Single Unit Operator
There are not as many single unit
franchise owners as there used to be. The trend toward multiple unit ownership
is strong, and it's not as easy to become a single unit franchise owner today.
However, that doesn't mean it's impossible. Improved access to credit may
benefit those who want to become single unit operators, but in reality, many
franchisors prefer working with only a handful of multi-unit franchisees to
dozens or hundreds of them.
Litigation and Healthcare Laws
Many franchise law cases in 2012 had
to do with the distinction between "franchisees" and
"employees," and your franchisee attorney should stay abreast of
current case law in this area. Additionally, new franchise owners must prepare
themselves for requirements of the Affordable Care Act, specifically
requirements for franchises with 50 or more full-time employees. Preparing now
can help things go smoother in 2014 when the law kicks into high gear.
The FTC and Franchises
The Federal Trade Commission regulates
franchises at the federal level, and your franchisee lawyer should stay up to
date on FTC rules and clarifications the FTC sometimes issues about their
rules. Often these rule interpretations have to do with geographic territories
and exclusivity that could affect your franchise significantly.
The "Accidental" Franchise
Sometimes people find themselves
operating as a franchise without even realizing it. If you are using someone
else's trademark for a fee, under certain state laws, you could be a franchisee
unintentionally. The FTC has a list of criteria that makes a business a
franchise, and if you are entering into a business that fulfills those
criteria, it may be subject to both federal and state laws governing
franchises. This is yet another reason to work with a franchise lawyer as soon
as you make the decision to become a franchisee.
Did you know there are nearly three
quarters of a million franchise-related businesses in the United States? Franchises
are appealing because they allow franchise owners to build a business on an
established brand. However, running a franchise comes with many restrictions
you might not face if you owned an independent business. You will pay fees to
the franchisor in order to use their trademark and business model, and both
parties sign a contract defining rights and obligations.
Protecting the Franchisor's Reputation
Because your franchise business stands
on the reputation of the franchisor, you will have to follow certain
contractual obligations to protect that reputation. You will probably have to
make your store look very similar, if not identical, to others in the
franchise, and you will almost certainly not be allowed to sell products other
than the franchisor's products. Employees will have to follow certain rules,
and you will have to get approval for advertisements.
Training and Who Pays for It
You and your employees will have to
undergo training on business operations. Most franchisors provide this for free
as part of your agreement. You may train at other franchise stores, or you may
go to a specific training location. Make sure the franchisee attorneys helping
you clarify who is paying for training before you sign the franchise agreement.
Franchises and Fees
Generally, franchisees pay periodic
royalties, which are calculated as a percentage of your sales, or as a
percentage of your profits. You will also pay a one-time up front fee to start
your franchise. Your franchisee lawyer should help you determine if you also
have to buy certain supplies from the franchisor. Anti-monopoly laws do
restrict franchisors' ability to force you to buy their products, however.
Franchisee Attorneys Should Be Helping
You from the Beginning
Franchise lawyers should be on board
with you as soon as you decide you want to buy a franchise. From helping you
understand franchise disclosure documents to dealing with problems like
contract termination, these legal professionals can prevent expensive mistakes
and help you get your franchise off to the best possible start.
