Considering a franchise?
Even if you’ve owned and operated your own business successfully in the past, there are some franchise facts you need to know before you sign on the dotted line.
The first thing potential franchise entrepreneurs should know is which rules apply in your state. For instance, some states have specific laws governing franchise relationships, particularly in the event of termination or non-renewal of a franchise agreement. Pennsylvania in particular does not have state statutes governing franchise relationships. Instead, Pennsylvanians must look to the Federal Trade Commission’s (FTC’s) rules for guidance.
Next, entrepreneurs must understand the nature and components of the deal offered by the franchise. Key components should include:
- Franchise Agreement. Usually drafted by the franchisor, the agreement will include the terms and conditions that govern the ownership and operation of the franchise. Important points may include franchise fees and costs, assignments, and advertising requirements, termination, and renewal, among others. Remember almost everything in business is subject to negotiation.
- Franchise Disclosure Documents. Mandated by the FTC, disclosure documents must address 23 different aspects of the franchise, including existing locations, required fees and costs, franchisor bankruptcy and litigation history, and audited franchisor financial statements.
- Franchise Marketing and Sales. How will the franchisor help your business succeed? Determine at the outset whether the franchisor offers field training and support, marketing support, compliance support, and ongoing research and development of products or services.
- Dispute Resolution. Discuss potential dispute resolution methods in the beginning and reduce your agreement to writing. Options to consider are whether your dispute will be addressed through litigation, arbitration, mediation, or a combination thereof, who is responsible for the costs incurred for dispute resolution, and who has the final call in selecting a forum, mediator, or arbitrator, if applicable.
These are basic aspects of entering into a franchise relationship you should consider before investing. For a more detailed analysis of your particular situation, contact the attorneys at the Scolieri Law Group, P.C. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can advise you regarding your franchise questions, or any other question related to your business. Contact us today at (412)765-0546 or via email at info@scolierilaw.com.