3 Things To Consider Before Signing Your Franchise Agreement

Franchises offer a balance between the freedom of starting your own business and the stability of an established brand. Unlike starting a business from scratch, purchasing a franchise offers access to resources, capital, brand identity, and other extremely helpful assets that can help your business thrive. However, there are a few things you should consider before signing your franchise agreement and opening your new franchise:

How much will it cost?

Starting a business can be extremely expensive, which is why franchising can be such an attractive opportunity. While the costs are still substantial, you may be able to get funding from the franchisor or use the brand’s reputation to help obtain a loan from a bank. Before signing your franchise agreement, make sure to consider exactly how much it’s going to cost and how you’re going to finance this new venture.

Is it right for you?

Franchising exists in a number of industries, not just fast food. As a potential business owner, determine whether your skill set and passion align with the needs and goals of the franchise. While it’s possible to run a successful franchise with no prior experience, being passionate or knowledgeable about the industry before signing your franchise agreement can be extremely helpful.

How much time can you invest?

Opening a franchise is just like opening your own business. It requires a lot of time and commitment to ensure everything runs smoothly. If you are already employed or have other commitments, consider if you’ll have enough time to dedicate to opening your new franchise.

When Should You Hire a Franchise Lawyer?

Franchises can be an extremely effective way to grow an existing operation. Regardless of the industry, franchising offers a number of benefits to both franchisee and franchisor. Whether it’s an efficient supply chain, established brand identity, or a network of meaningful connections, franchises provide the opportunity to start a new business with a fraction of the risk.

While franchise agreements generally cover important terms and provisions that dictate the relationship between franchisee and franchisor, there are still a handful of issues that may arise. Whether you’re the franchisee or franchisor, franchise lawyers can help make your business relationship both effective and fair, even in the face of controversy. Here’s when you should consider hiring a franchise lawyer:

Before signing your franchise agreement

Franchise agreements provide a framework for how a new franchise will operate, complete with payment details, confidentiality agreements, and more. They are an essential part of any successful franchise, making it important that you understand the terms before you sign. A franchise lawyer can help you decipher the legal jargon to ensure that you understand what you’re getting yourself into.

When there’s a business dispute

If there’s ever an issue between franchisee and franchisor, it’s not advised to try to handle it on your own. Franchise lawyers can help mediate and smooth out any disputes so that all parties are satisfied with the resolution. Regardless of the nature of your dispute, you should consider calling a franchise lawyer before jumping to any conclusions.

Franchise lawyer on retainer

As a franchisee or franchisor, it never hurts to have a franchise lawyer on retainer. Doing so can help you run your business within all legal boundaries to ensure you don’t get yourself into any trouble. Experienced franchise lawyers can also help you streamline your operation, providing a greater potential for growth.

If you’re looking for an expert team of professional lawyers, contact Law Works. They’re one of Canada’s select few boutique law firms with expertise in franchise and business disputes. Law Works represents international and Canadian franchisors, master franchisees, multi-unit franchisees and local single-unit franchisees.

Franchise Agreements: Everything You Need To Know

Opening a new franchise is an exciting event for all parties involved. Whether you’re a business owner looking to open a new franchise location or a prospective franchisee, you may be wondering about the legal aspect of this opportunity. Franchise agreements are an essential part of any effective franchise relationship, so here’s everything you need to know.

What is a franchise agreement?

A franchise agreement is a legal contract between franchisee and franchisor that dictates the terms of the relationship. They include things like trademarks, know-how, the structure of franchise, and other important operational details. They also might include various provisions like payment terms, disclosures, confidentiality, obligations of each party, and more.

Why do I need a franchise agreement?

Franchise agreements are an essential part of any successful and healthy relationship between franchisee and franchisor. Without them, either party may be treated unfairly, taking away from potential profits or negatively impacting the franchise as a whole. Having a legal contract that dictates rights, terms, and other provisions ensures that the new franchise will be able to operate smoothly without harming the brand or franchise as a whole.

Who uses franchise agreements?

Anyone and anyone considering opening a new franchise. Regardless if you are a new franchisee or the franchisor opening a new location, it’s important that all parties are protected to ensure that all parties are treated fairly for the duration of the relationship. Even if you have a pre-existing relationship or have discussed the terms in detail, franchise agreements can help prevent issues and solve disputes if one arises.

Key Elements of Franchise Agreements

Whether you’re opening your first franchise or selling your tenth, franchise agreements are an essential part of any successful business relationship. They can influence the structure of your operations, suppliers, finances, and a handful of other important considerations.

With so much at stake, it’s extremely important to understand the details of your contract before hiring a franchise lawyer to finalize the contract. To help you get started, here are a few of the key elements of a franchise agreement.

Rights and Obligations

These clauses in franchise agreements lay the groundwork for the relationship between franchisor and franchisee. They establish the necessary rights the franchisees will need to develop and operate the business effectively while outlining the support that will be given by the franchisor. It’s in the best interest of both parties to succeed, so it’s important that the rights and obligations are clear.

Marketing and IPRs

Regardless of the size of the business franchise, franchisors invest considerable time and money into building their brand, reputation, and operation. The franchisee owner will use the existing framework to further develop and grow the business, but it’s important to protect the franchisor’s hard work. Marketing and IPR provisions in franchise agreements facilitate a balance between old and new to ensure uniformity as the brand continues to grow.

Termination Provisions

Failures are an important reality of opening a business. Unfortunately, business relationships are not always successful, so it’s essential to outline how to terminate a franchise agreement and what happens next. Whether the relationship comes to an end due to poor training, inadequate financing, a weak business model, or any other factor, termination provisions are absolutely necessary.

Four Types of Franchise Agreements

Opening a new franchise is an exciting opportunity, but it can also be a bit overwhelming if you don’t have a lot of experience. Whether you’re opening a single store or a new chain, your franchise agreement helps determine the guidelines for the relationship between franchisee and franchisor.

A franchise lawyer can help you understand your franchise agreement, but it’s important to understand what type of agreement you are entering into so that you can choose the right lawyer for the job. If you are considering opening a new franchise, here are the four types of franchise agreements that you may come across:

Single Unit Franchises

Single unit franchise agreements are the most simple and common form of agreement, and the name pretty much says it all. These agreements allow a franchisee to open a single franchise location, and they are a great way to learn about the franchise system before considering additional units.

Multi-Unit Franchises

Multi-unit franchise agreements grant the franchisee permission to open multiple units. They outline the number of units the franchisee is allowed to open over a specific period of time. If franchisee owners have multiple units, there’s a good chance that the franchise organization is stable and doing well.

Area Development Franchises

Area development franchise agreements are similar to multi-unit agreements in that they allow the franchisees to open a specified number of units. The only difference is that this type of agreement limits development to a specific area.

Master Franchise Agreements

Finally, master franchise agreements are just like area development and multi-unit agreements, but with a bit more authority. These agreements allow franchisees to open a specified number of units in a given area, but also give them the power to sell units and usually receives royalties from franchisees.

Before signing a contract agreement, make sure you talk to a professional franchise lawyer. Contact Law Works in Waterloo for expert business and legal advice on all types of franchise agreements.

How Franchise Lawyers Can Help with Franchise Agreements

Opening a franchise can be a fulfilling and exciting opportunity if you play your cards right. Often times, new franchise owners come across a lot of legal jargon and uncertainty in franchise agreements, which can be intimidating or even a bit overwhelming. Your franchise agreement dictates the relationship between franchisee and franchisor, so it’s important to make sure both parties are treated fairly. It never hurts to get some outside help if you are considering a franchise agreement, here are a few reasons why:

They can offer advice on how to choose a business entity

Should your business be a Limited Liability Corporation (LLC)? Maybe it should be a Subchapter S? Or perhaps you should file for a C-Corporation? If you don’t know the difference, you can set yourself up for future complications. It is paramount to choose the right business entity for your new franchise. It determines your legal rights and liabilities as a business owner, and also influences how your business is taxed. A franchise lawyer can offer useful suggestions on how to set up your your new franchise business.

They can help with legal compliance

Franchise lawyers possess relevant knowledge to ensure your franchise agreement complies with local, national, and international law. Whether it’s a small municipal law or a major legal principal, franchise lawyers can help you navigate your franchise agreement to ensure its fair for both parties.

Franchise lawyers keep things simple

Franchising, especially franchise agreements, can be complicated. Experienced franchise lawyers can help you cut through complications by explaining how certain terms or documentation work together, clarify legal boundaries, and negotiate a desirable agreement between franchisee and franchisor. Contact Law Works, Canada’s leading business law firm for professional franchising help. 

Is a Franchise Business The Right Fit For You?

At one point or another, many of us have flirted with the idea of starting our own business. The complicated process can stop many dead in their tracks while they wrestle with such tough decisions; what type of business should I create? How am I going to run it? Do I need a partner? Most default to starting a brand new idea, but there is a strong argument to be made about entering a franchise agreement.

Opening a franchise is a unique way of starting a company as it allows individuals to build their own business while having the recognition of an established entity behind them. For some this is an ideal scenario, however it is essential to be well informed and patient when structuring the franchise agreement. The agreement is meant to be a mutually beneficial arrangement, therefore, you must ensure there aren’t any clauses that could lead to future conflict or disputes.

While franchises are often beneficial in most regards, the aspect of partnering with a well-known company can just as quickly deter potential franchisee suitors. That is because it can be very intimidating when it comes time to negotiate the franchise agreement. Being prepared by entrusting the negotiation process to a franchise lawyer can rid yourself of any anxiety and instill confidence that your best interests are their primary concern.

A healthy relationship is vital for success, and should benefit both parties to ensure that neither is treated unfairly. As such, a well-structured franchise agreement in the early stages will lead to future benefit by preserving this bond. If you’re interested in finding out if a franchised business is right for you, contact Law Works in Guelph to speak with a franchise lawyer today.