In the dynamic landscape of modern businesses, franchise ownership has gained unprecedented popularity. It has transformed ordinary entrepreneurs into extraordinary business tycoons. Due to its immense potential and successes, franchise business is likely to expand and set new records with time.
If you are interested in buying a franchise business and confused about your decision, you have come to the right place. In this article, we will answer all your questions related to buying a franchise. Without further ado, let’s dive into it.
Is buying a franchise business a good idea?
The franchise business is considered one of the most successful business strategies and is likely to expand with time. There are many positive aspects of the franchise business; these include;
- Proven Business Model and Brand Recognition- One of the most critical challenges faced by any entrepreneur is to establish a brand, and buying a franchise provides a solution to this challenge. Because franchises come with a proven business model, a track record of success, and brand recognition, it helps the new franchisees to navigate through the market.
- Training and Support- Franchisers are established businesses with years of experience. They develop standard practices, and in order to protect their interests, they often provide training and ongoing support to franchisees, which can be really helpful, especially for those who lack experience in running a business.
- Marketing and Branding- A considerable chuck of investment goes to marketing in the initial stages of business. If you buy a franchise, you can save your effort and money in marketing a new brand and receive well-established marketing strategies and brand recognition. It becomes a lot easier to enter into a new market.
There are many other benefits, including access to bulk purchasing, established supply chains, the opportunity of networking with other business owners, etc. Therefore, buying a franchise is highly regarded.
Why should franchise owners have a lawyer on their side?
If you are planning to buy a franchise, it is important to hire a competent attorney to assist you in dealing with the following challenges associated with franchise business;
- Buying a franchise involves high upfront costs, including franchise fees, equipment, and build-out expenses.
- Franchisees must pay the franchisor ongoing royalties and advertising fees, which can affect their profit margin.
- Franchisees have to act in compliance with the franchisor’s operational guidelines, rules, and standards.
- Selling a franchise is a tricky affair and involves many complications.
To address these challenges, it is imperative to have thorough market research, technically analyze the rules and regulations of the franchisor, and have well-drafted legal instruments which explicitly showcase the terms of the contract. Only an expert lawyer can deal with these challenges. Therefore, it is highly recommended to hire the services of a competent legal attorney in the franchise business. An attorney will technically analyze all aspects of the company and protect your interests.
How can anyone become a franchise owner?
Buying a franchise business is a comprehensive process. To make the procedure easy, we can understand it in the form of a stages;
Stage 1- The first step is research. In this stage, you will have to figure out your interest and then search for franchise opportunities aligned with your interests.
Stage 2- The second step is to understand the financial aspect of the business. Once you figure out a franchise, you will have to search about the initial fees, royalties, and other fees associated with it. After that, you can calculate the total investment requirement and prepare funds for the same.
Stage 3- In the third stage, you have to reach out to franchisers and present your offer. You can also request them to provide information about their business model, support structure, training programs, etc.
Stage 4- If the franchisor accepts your request, they will provide you Franchise Disclosure Document (FDD). This document is imperative and will give you information about its financials, fees, legal obligations, terms and conditions, etc. According to the Alberta Franchises Act, franchisor has to deliver a franchise disclosure document to franchisees at least 14 days before the prospective franchisee signs an agreement or makes a non-refundable payment related to the franchise.
The disclosure document should include the following;
– Financial statements
-Information about the franchisor
-Obligations of the franchisee
-Fees and initial investment costs
– Restrictions on products and supplies involved in the business
-List of current franchisees operation in Alberta
-Details of earning claims
Stage 5- Once your attorney reviews the Franchise Disclosure Document and gives you the go-ahead to proceed, you can sign the agreement with the franchisor and start your franchise business.
To find more information about it, you can check out the link below;
How will a lawyer help in buying/drafting a contract during a franchise business purchase?
An expert attorney is an imperative pre-requisite during a franchise business purchase. A lawyer can help in drafting contract and buying a franchise in the following manner;
- Franchise Disclosure Document (FDD) is a very complex document, and only an expert attorney can review its technical aspects, provide expert advice on the legal implications of the contract, and ensure that you fully understand what you agree to.
- Negotiation with Franchisor- After reviewing the Franchise Disclosure Document, your lawyer will identify the weak areas and assist you in negotiating a favorable deal with the franchisor.
- Legal Compliance- Buying a franchise business involves many rules and regulations. In order to ensure the smooth running of the business, it is imperative to act in compliance with the laws, and only an expert attorney can ensure compliance with relevant laws and regulations.
- Drafting legal documents- To give legal cover to your deal with a franchisor, you must enter into the contract and sign different documents. Your lawyer will prepare all the legal documents for you and ensure that all the terms and conditions of the contract are clear to both parties and protect your interests.
- Conflict Resolution- A lawyer is not only important during the initial phases, but the presence of an attorney is always beneficial. If there arises any dispute or disagreement between you and the franchisor, your lawyer can assist in resolving these issues through negotiation, mediation or take legal action if the need arise.
Can anyone get out of a franchise agreement?
Yes, it is very common for a franchisee to exit from a franchise business. Some of the most common ways of exit are;
- Most franchise agreements set a particular limit, and after that, the agreement expires. If both parties are willing, they can renew the agreement; otherwise, the franchisee can exit from the business.
- You can also sell your business to another entity; however, to transfer franchise rights, the approval of the franchisor is mandatory.
- If any issue arises and both parties are willing to terminate the contract, they can do, or if any conflict arises, legal action can be taken to address the conflict.
As discussed above, buying a franchise business is a very complicated, expensive, and technical process. Therefore, an expert attorney or a group of attorneys with expertise in franchise law is essential. If you are buying a franchise business, it is highly recommended to hire the services of legal professional.
We at Juriscorp Law have a team of business attorneys with years of experience dealing with franchise law. We have been working with hundreds of businesses, and our dedicated team is working tirelessly to protect the best interests of our clients.
We also offer free initial consultation to potential business owners. So, what are you waiting for?
Contact us and avail the benefit of free initial consultation.