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buying a franchise

Buying a Franchise: What You Should Know Before and After

Buying a franchise can be an exciting venture, offering a tried-and-true business model with the support of an established brand. However, it’s crucial to navigate the legal landscape thoroughly before you commit. What should you know before and after buying a franchise? Parrish & Goodman, Attorneys at Law, want you to understand some of the legal concerns associated with buying a franchise so you make informed decisions and avoid complications down the road.

What Are Some Key Legal Considerations Before Buying a Franchise?

A franchise is a legal and commercial relationship between the owner of a trademark, brand, or business model (the franchisor) and an individual or company (the franchisee) that is allowed to operate a business under that brand or model. The franchisee pays initial fees and ongoing royalties in exchange for the rights to use the franchisor’s name, products, and operational support.

Franchise Disclosure Document (FDD)

Before signing any agreements, it’s essential to review the Franchise Disclosure Document. This document provides valuable information about the franchisor, including their financial performance, operational requirements, and any legal issues they may have faced. In fact, the FDD must include 23 specific items of information about the franchise, its officers, and other franchisees. Take the time to read the FDD carefully and consider consulting with a Florida Business Attorney to understand your rights and obligations.

Legal Structure of the Franchise Agreement

The franchise agreement is a legally binding contract that outlines the terms of the franchise relationship. This document covers various aspects, including fees, territory, duration, and termination conditions. Ensure you understand every clause in this agreement, as it will dictate your business operations.

Intellectual Property Rights

One of the primary benefits of purchasing a franchise is accessing the franchisor’s brand and trademark. Ensure that the franchise agreement explicitly grants you the rights to use the franchisor’s trademarks, logos, and proprietary systems. Protecting these rights is crucial for maintaining your business’s integrity and reputation.

Compliance with Franchise Laws

Franchise laws can vary significantly by state, so it’s vital to ensure compliance with both federal and local regulations. For example, the Sale of Business Opportunities Act no longer requires franchisors to file an annual Franchise Exemption Notice with the Florida Department of Agriculture and Consumer Services. The Federal Trade Commission (FTC) regulates franchising and mandates that franchisors provide potential franchisees with specific disclosures. Before proceeding, familiarize yourself with the laws applicable in Florida with an experienced business attorney.

Financial Implications

Understand the initial franchise fees, ongoing royalties, and any additional costs you may be responsible for. It’s essential to have a clear picture of the financial obligations involved and consider consulting an accountant or financial advisor to assess the overall investment.

What Are the Main Legal Considerations After Buying a Franchise?

Once you’re in business, your legal concerns are not gone. Here are some factors you should continuously monitor after buying your franchise:

Ongoing Compliance

Once you own a franchise, it is crucial to adhere to the terms of the franchise agreement and continue to comply with relevant laws. This includes maintaining specific operational standards as outlined by the franchisor and adhering to local business regulations.

Dispute Resolution

Familiarize yourself with the dispute resolution process outlined in your franchise agreement. Many franchisors include mediation or arbitration clauses that require you to resolve disagreements out of court. Understanding this process can save time and money should disputes arise.

Renewal and Termination Clauses

Be aware of the terms regarding the renewal of your franchise agreement and the conditions under which it can be terminated. Knowing these aspects can help you plan for the future and avoid potential pitfalls.

Changes in Business Structure

If you plan to transfer your franchise ownership or make significant changes to your business structure, check the franchise agreement for any stipulations regarding such changes. Most franchisors have specific requirements that must be met for a transfer to take place.

Schedule a Free Consultation with Our Florida Business Lawyers

Buying a franchise can be a rewarding opportunity, but it’s essential to approach the process with a clear understanding of the legal implications. Taking the time to investigate legal concerns before and after your purchase can help ensure a smoother operation and greater success for your business. Whether you are in the consideration stage or have already purchased a franchise, consulting with Parrish & Goodman Attorneys at Law, can help you have a successful franchise business.

Schedule a free consultation in person at our Naples or Fort Myers offices or virtually via Zoom to share your needs, problems, and goals and put our team to work protecting your interests. Call us today at 813-643-4529 or complete the contact form and request your consultation.