Franchise businesses have a significant impact on our economy. In the United States alone, franchisees operate more than 750,000 franchises. Once you get past the excitement of choosing your franchise, you still need to pay attention to the paperwork required to get your company rolling. Take some time to consider the source of legal documents before signing them. Knowing who wrote your franchise agreement is one of your first steps.
The Franchise Agreement
When a franchisor and franchisee strike a deal, they sign a franchise agreement. This legally-binding contract typically includes a grant of franchise and provisions that cover:
- Details about the franchisee’s territory or location;
- Fees and purchases the franchisee is required to pay;
- The franchisee’s advertising obligations;
- Services offered by the franchisor;
- Intellectual property protection;
- Training for the franchisor and its employees,
- Franchisor’s right of first refusal;
- The relationship between the franchisor and franchisee;
- Non-compete language; and
- Methods of dispute resolution.
These provisions can dramatically affect the franchisee’s ability to operate the franchise successfully.
Remember that documents prepared by your franchisor probably don’t have your best interests in mind. The franchisor’s attorney naturally will be more concerned with his or her client. Before signing, have your business attorney review the documents for any provisions that might have unintended consequences.
The Florida Franchise Act
Florida law provides some protection against misrepresentation. In fact, franchise owners in Florida may be protected by provisions in the Florida Franchise Act. For example, it is unlawful for someone to “intentionally misrepresent the prospects or chances for success of a proposed or existing franchise or distributorship.” Someone who misrepresents information to potential or current franchisees may face both civil and criminal penalties.
Get a Comprehensive Review of Your Franchise Agreement
Your new business is too important to leave to chance. Have your business attorney or corporate counsel make sure your franchise agreement is rock solid.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed tm. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. we represent clients throughout South Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, and surrounding communities.