Purchasing a Franchise: Legal Considerations

Purchasing a franchise can be very exciting. A franchise offers business owners a limited degree of independence and often a whole lot of support. For many, this is an alluring business model. For others, not so much.

Individuals looking to purchase a franchise should carefully consider the pros and cons of owning and operating a franchise. They should also thoroughly research each particular franchise to ensure that the programs and support are strong, and that the franchise has a good track record. (This franchisor checklist is a good place to start.)

There are legal considerations, as well.

In some cases, franchise development directors will tell franchise buyers that they do not need an attorney. They may also claim that there is no room for negotiation in the contract. However, there is always one key question, that when asked correctly, can open up the entire franchise agreement to negotiation.

Your FDD and franchise agreement can be long, detailed, and difficult to understand. Opaque language in the franchise agreement can be exacerbated with seemingly conflicting terms. However, this could be the most important contract you ever sign, so it’s important to understand every word of what you’re signing.

Working with an attorney is more than advisable when entering into a franchise agreement – it is critical. An experienced attorney can review the terms of the contract and alert you to any potential red flags. In fact, a highly qualified attorney should highlight as many red flags as he or she sees, and if you can justify or measure such risk, you may have found yourself the right franchise for you. If you can’t, then proceed with caution. An attorney can also help you negotiate the contract. This may help you avoid potential disputes in the future.

A strong start – with eyes wide open - can lay the foundation for a strong business. Make sure your legal bases are covered as you move through the stages of starting a franchise.

Talk to an attorney today: If you are interested in speaking to a business attorney about your needs, please call our law office at 503-446-6261.

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