Legal Aspects When Thinking of Buying a Franchise?

Buying a franchise can be an exciting and lucrative opportunity for entrepreneurs looking to start their own business. With the backing of a well-established brand and proven business model, franchise ownership can provide a lower risk option compared to starting a business from scratch. However, there are many important considerations to keep in mind when exploring franchise opportunities, including the need for good legal help.

One of the first steps in buying a franchise is to thoroughly research the industry and the specific franchises you’re interested in. Consider factors such as the demand for the products or services offered by the franchise, the competition in the market, and the track record of the franchisor. It is also important to assess your own skills, experience, and interests to determine if a particular franchise is a good fit for you.

Once you identify a franchise you might be interested in buying, you should carefully review the franchise disclosure document (FDD) provided by the franchisor. The FDD contains important information about the franchise system, including the franchisor’s financial statements, the terms of the franchise agreement, and the obligations of both the franchisor and the franchisee. You should seek the advice of a knowledgeable franchise attorney Ohio to ensure that you fully understand the terms of the franchise agreement.

An important consideration when buying a franchise is the initial investment required. In addition to the initial franchise fee, there may be other costs such as equipment, inventory, marketing, and working capital that need to be taken into account. You should also review carefully the financial projections for the franchise provided by the franchisor and contact a few of the current franchisees to ask about their experiences in the franchise system; their names and contact information are provided in the FDD.

Another important consideration is the amount of the ongoing fees and royalties that are payable to the franchisor. These can include a percentage of revenue, monthly minimum fees, and marketing contributions. In some cases, a lower initial investment may be offset by higher ongoing fees, so it is important to carefully evaluate the total cost of ownership over the life of the franchise.

One of the key benefits of buying a franchise is the support and training provided by the franchisor. This can include initial training for new franchisees, ongoing support from a field representative, marketing assistance, and access to a network of other franchisees. This can be a valuable resource for new business owners who may not have experience in running a business. However, it is important to ensure that the support provided by the franchisor meets your needs and expectations.  Franchisors sometimes promise much but fail to deliver.  This is something to discuss when you contact a few existing franchisees.

In addition to the business considerations, it is important to seek good legal help when buying a franchise. Franchise agreements are always lengthy, complex and one-sided.  Only a knowledgeable franchise attorney can help you understand whether your franchise agreement contains typical terms favorable to the franchisor, or is perhaps even more one-sided than is typical. If a franchisor has an unusually one-sided agreement, buyers should probably walk away and look for a different franchise to buy.  Your franchise attorney can also help you understand the legal implications of the franchise agreement, including the restrictions on your ability to operate the business, the termination provisions, and the dispute resolution process.

Buying a franchise with the backing of a well-established brand and proven business model can be a great way to start a business. By carefully researching the industry, reviewing the franchise disclosure document, and seeking the advice of a knowledgeable franchise attorney, you can make an informed decision and increase your odds of success as a franchise owner.