Avoiding Common Pitfalls in the Franchise Business Model

It is the wish of every business person to sell the products of well-established brands. The good news is that this can happen, although most prospective investors have no clue where to begin. Fortunately, we can spare you much research.  A franchise business model is an answer, and you can establish it in all business sectors.

In a franchise, the investor is called a franchisee. When you are the franchisee, you need to contact a franchise lawyer to help you with legal issues and solve future business disputes. A franchise lawyer will also help safeguard your business interests and ensure you’re not given a bad deal.

Franchise Law Explained

Franchise law is a mixture of federal and state laws regulating and governing franchises. The laws address different aspects of a franchise, including offer & acceptance, working relationships, and terms of sale. The federal laws require a provision of pre-sale disclosures via a franchise disclosure document (FDD). Individual states may require franchisors to provide more disclosures to supplement the federal-level disclosures.


What is a Franchise Agreement?

Franchise agreements are binding and legal documents that regulate a franchise. The contents of a franchise agreement include:

  • Expectations the two parties
  • Obligations of the transacting parties
  • Operating restrictions
  • Fees
  • Trademark details


Litigation for Franchise Disputes

Most franchise agreements include elaborate conflict resolution solutions for emerging disputes, such as mediation or arbitration. If an agreement lacks a dispute management solution, the franchisee or the franchisor can try mediation. A franchisee should be represented by an attorney for mediation. Therefore, call a franchisee attorney before starting mediation.

Common Franchising Disputes

Franchises should be governed by franchise laws. Legal disputes in a franchise may have dire consequences, causing conflicting interests, hindering business operations, and choking growth. Since franchise agreements are typically designed with franchisors’ interests in mind, franchisees should ensure they have proper legal representation before committing themselves. This will guarantee prompt action to disputes and minimal business disruptions. Common disputes in a franchise include:

  • Agreement, termination, or disclosure
  • Breach of trust
  • Non-compliance
  • Fraud and false disclosures
  • Breach of a contract or licensing agreement
  • Enforcement challenges
  • Franchise termination disputes

In most termination disputes, the franchisor takes legal action against the franchisee to protect their interests and recover damages. Regardless of the scenario, it is wise to be prepared beforehand by hiring a competent franchising attorney.

Features of a Promising Franchisee

Successful franchisees have the following characteristics:

  • Willingness to learn
  • Patience
  • Able to stay within the confines of the franchise agreement
  • Discipline
  • Basic understanding of how small businesses are operated


Duties of a Franchise Lawyer

The main duties of a franchise lawyer include:

  • Provide legal advice
  • Explain state and federal franchise laws
  • Ensure that the client complies with franchise laws and regulations
  • Prepare the franchise agreement
  • Litigations
  • Negotiating franchise deals
  • Dispute resolution
  • Ensure the client complies with the terms of a franchise agreement

If you are considering investing in a franchise, you should first call a franchise lawyer who will help safeguard your business interests while providing legal help on franchising.Picture1

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