The Ups and Downs of Franchise Ownership
Owning and operating your own business is a dream for many Americans. After years of taking orders from someone else, they’re ready to strike out on their own and become their own boss. But as you can imagine, there’s a myriad of legal considerations that come into play.
Opening a new business carries considerable risk – both legally and financially. Fortunately, you don’t have to do it all by yourself. For many entrepreneurs, owning a business franchise provides the sense of independence they’re looking for while also providing a managerial safety net. Through franchising, a small mom-and-pop operation can provide services to consumers using the products, trademarks, and business methods of the larger corporation.
Franchises Agreements Cover Wide Range of Businesses
From fast-food restaurants to cleaning services, from auto maintenance shops to hair salons, franchise opportunities abound. Some types of franchise relationships allow for some flexibility in running the business. Others require the franchisee to follow a strict system for the sale of goods and services.
The International Franchise Association – an organization whose mission is “to protect, enhance and promote franchising through government relations, public relations and educational programs” – advises anyone considering opening such a business to consult with an attorney before signing a franchise agreement.
The paperwork should include a disclosure document detailing the rights and responsibilities of the franchisee and the franchisor, the company’s history with respect to bankruptcies and lawsuits, and any required investments, purchases, ongoing royalties and fees. According to IFA, once a potential franchisee receives that information, the company is required to give the prospective operator 14 days to mull it over – a “cooling-off period” – before signing the franchise agreement.
Florida Law Protects Franchise Owners
Both state and federal laws govern the buying and selling of business franchises. In Florida, the transaction is covered under the Florida Franchise Act, which is designed to protect parties from any misrepresentations in the process.
Specifically, the law holds anyone involved in the selling or establishing of a franchise accountable for misrepresenting the total investment required, the prospects for success of the business, or any efforts to establish additional franchises in the market beyond what the market can reasonably sustain.
If the court determines that a misrepresentation has occurred, it can order the return of the monies invested plus reasonable attorneys’ fees.
Know Your Rights
Entrepreneur magazine outlined a number of advantages to buying a franchise over owning an entire business outright, chief among them being the minimization of risk. Franchise owners receive training and ongoing support, a business plan that’s already been proven to work in other locations, and assistance with the design and layout of the brick and mortar operation.
Some franchisees, however, may find that the contract they’ve entered into doesn’t provide the level of freedom and independence they’d hoped for as a business owner. It’s a complicated relationship to be sure, which is all the more reason to sit down with an experienced attorney who knows this area of business law before signing a franchise agreement.
At the Law Offices of Larry E. Bray, P.A., with offices in Lake Worth, West Palm Beach and Boca Raton, our practice utilizes a team of people to assess your situation, review your options, and make sure you understand the terms of any franchise agreement presented to you. To discuss the legal ramifications of owning and operating your own business, contact us today.
