Franchise Agreements: Rights and obligations that should be included.

| Jul 15, 2019 | Franchise

Starting a franchise can come with significant advantages. You do not have the risk and expense of developing your own brand, but you still have a lot of independence to make decisions for managing your business.

While you may be excited about the opportunity, franchise agreements are often complicated and make it difficult to know what you will get for the money you pay. The agreement explains your rights and duties and franchisors are required to provide a disclosure document detailing essential information. However, some details may be difficult to find or understand.

The following are some areas of the documents to which you should pay particular attention:

(1) Costs

(2) Territory

(3) Restrictions on your business operations

(4) Your obligations as a franchisee

(5) Intellectual property rights and limitations

(6) Dispute Resolution with franchisor

(7) Franchisor’s financial statements.

How much will all this cost?

Franchises generally cost between $20,000 and $50,000. Buying a franchise does help you get your business started by including information and materials, such as:

  • Training
  • Marketing materials
  • Licensing fees
  • Site selection

In addition to the franchisor’s initial fees, you will also need to make an investment in commencing your business operations. Going forward, you can also expect to pay the franchisor a percentage of your profits. The franchise documents should be clear about how much and how often you will pay franchise fees, license fees and/or royalties to the franchise owner and the method to make such payments.

What area does the franchise cover?

Typically, there will be a provision in a franchise agreement that discusses territory. The size of the region may depend on the type of business and the number of franchise locations in your area.

Pay careful attention to the coverage of the territory. There could be severe consequences for marketing to customers outside the agreed territory. You should also research the area to be sure the territory will not give you too many limitations for making the franchise successful.

Whether you are operating a franchise as a franchisee or offering franchises as a franchisor, you are likely to face a broad variety of legal and regulatory issues specific to franchises. With the backing of a strong entrepreneurial business sense, together with the expertise and skillsets drawn from several of our diverse practice areas, SederLaw attorneys fully understand the ins and outs of franchising and advise clients on Franchise Law matters in a wide array of situations.

Our Franchise Law attorneys are experienced in assisting both start-up and mature franchisors and franchisees with developing, licensing and protecting their various rights, franchises and distribution systems; and, in the case of franchisees, ensuring compliance with the complex myriad of rules and provisions that are often imposed upon their franchisee businesses by franchisors. As part of this practice, we counsel companies regarding the laws and regulations pertaining to both franchising and operating a franchise and assist them in creating and negotiating their contracts and agreements, franchise disclosure documents, intellectual property rights and other critical operational documents.

SederLaw’s Franchise Law attorneys are skilled at navigating the challenges that arise for both franchisors and franchisees in a variety of industries, including retailers; indoor game and amusement parks; restaurants (including both full and fast food service restaurants); insurance; healthcare and home health services; real estate; wine, beer and alcohol distribution and service; professional services companies; and automotive dealerships.

When disputes arise, attorneys in our Franchise Law group have the knowledge and experience to help guide our clients through every kind of legal proceeding. With our experience in mediation, arbitration, and litigation, we understand the risks inherent in the relationship and work with our clients so that they can focus on franchise brand and system growth. Our lawyers keep informed and abreast of new laws and court decisions that can impact the outcome of a dispute, and we use our experience and knowledge to help our clients make decisions that account for the variety of challenges that a franchise client will face.

Contact:

Partner, James Vevone
SederLaw
339 Main Street, Suite 300
Burnside Building
Worcester, MA 01608
[email protected]sederlaw.com
508-757-7721 

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Mr. Vevone serves as counsel to a number of real estate clients, including regional and national developers and investors, in connection with shopping center and mixed-use development projects. He assists developers in structuring and documenting purchase transactions with investor subscription; financing; and, tax deferred exchange.