There are plenty of reasons to consider purchasing a franchise when you decide to leave the 9-to-5 behind and become your own boss. Because a franchise is part of an existing business entity, you’ll gain all the benefits of a known brand, including a built-in customer base and established parameters for operations. You won’t have to build your business from scratch when there are already policies and procedures in place to guide you through hiring and training employees, setting up your store, and even running marketing campaigns, just for example.
Buying a franchise may entail a steeper price tag than the average startup operation, but you’ll get a lot for your money. In addition to an established business plan and mentorship to help you get started, you stand to see much quicker profits with an established and trusted brand, helping to offset initial costs.
Of course, before you enter into any franchise agreements, you first need to understand the legal ramifications of joining a brand family. Although you will own your business, you’ll still be accountable to the franchisor. In order to ensure a fair arrangement and a successful venture, you need to consider the legal factors involved in purchasing a franchise before you pull the trigger.
Contracts are Legally Binding
Any time you sign a contract, it is absolutely essential that you go over it with a fine-tooth comb, preferably with the help of qualified legal counsel. You are responsible for upholding your end of the bargain, as well as making sure your franchisor upholds their end, and the best way to do this is to fully understand what you’re getting into from the start.
If you fail to fulfill your obligations as spelled out in the franchise contract, you may be subject to penalties or even lawsuits as a result. If you disagree with portions of the contract that you are bound by after the fact, you’re out of luck. This cannot be stressed enough – read and understand a franchise agreement before you sign in order to avoid legal issues later on.
Negotiation is Possible
Okay, so you read through the franchise agreement and found that there are certain points you don’t agree with. Many prospective franchisors mistakenly assume that a contract is ironclad, and in fact, some franchises present their agreements as non-negotiable. However, this is rarely the case.
Franchisors are almost always open to negotiation. This doesn’t mean they’re going to acquiesce to your every demand – by their very nature, franchise agreements are meant to protect the franchise and the brand. Still, you may find franchisors amenable to certain amendments or addendums to existing contracts.
If you feel that a contract is too restrictive and it will impair your ability to run your business effectively or maximize profits, simply discuss possible changes with the franchisor. In many cases, franchisors are willing to listen and compromise, especially for the benefit of the brand.
You Should Read the FDD
Franchisors are legally required to provide franchisees with a Franchise Disclosure Document (FDD) containing legal disclosures pertaining to pertinent business and legal issues that could affect your decision to purchase a franchise. These disclosures, mandated by federal law, could include information about the franchise and franchisor; lists of franchisees, as well as franchise locations and the number of franchises opened and closed; and data pertaining to costs, including purchase price and ongoing fees.
It’s important to thoroughly review the FDD, preferably with a qualified attorney, to look for any red flags like franchise locations in direct competition with each other, fees you don’t agree with, or high numbers of recent closures. The FDD can provide you with valuable information about the health of the franchise and help you to decide if purchasing a franchise is a good investment.
You Can Speak to Other Franchisees
There is nothing to stop you from contacting other franchisees to find out about their experience with the brand. These business professionals can give you an inside view of the franchisor/franchisee relationship and the level of support and involvement you can expect when you join the franchise. You can learn important details about daily operations, overall profitability, and what it’s really like to run the business, and you can find out whether or not franchisees are satisfied with their experience.
When you start perusing the best franchises for sale in Austin TX, you may be overwhelmed by your prospects. However, it’s imperative that you exercise due diligence when exploring the legal factors involved with purchasing any franchise. This can help you to make an informed decision that is right for you.