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Franchise Law 101

Posted by Jeremy Brasch | Mar 01, 2021 | 0 Comments

There are numerous facets of franchise law that can seem daunting and overwhelming. With separate processes regarding franchisees, franchisors, franchise agreements, and franchise litigation, it is easy to get lost in all of the legal jargon when starting your dream business. Our Charlotte legal team provides a guide to franchise law to help you better understand its complicated procedures.

Franchisees

Franchisees are individuals or companies who hold a franchise for the sale of goods or the operation of a service. These individuals or companies have purchased the rights to use an existing business's trademarks, business model, and other proprietary knowledge relevant to the brand. Though these individuals become owners and independent operators of the third-party business, they are still responsible for upholding the franchise's values and interests.

One benefit to operating a franchise is that it is substantially easier to purchase an established business rather than starting a business from the ground up. The main reason for this is that franchises have a much lower start-up cost than businesses from scratch. Franchisees are under the close supervision of the franchisor (those who own the brand) to help support and guide them in their new franchise, making it ideal for entrepreneurs with little business management experience.

Franchisors

Franchisors are those who sell the right to open stores and sell products or services using their brand, intellectual property, and business model. These are the original or existing businesses that sell the right to use their name and brand.

There are several steps to take when considering the start of a franchise, the information on which can be found in our other blog here.

There are several key advantages to starting a franchise, including:

  • A higher market share
  • Scalability: Focusing on large-volume national growth or even low-volume regional growth
  • Additional streams of revenue

One thing to keep in mind is that franchises are best suited for businesses and brands that have already been proven as well-established and successful companies.

Franchise Agreements

Franchise agreements are legally binding documents that outline a franchisor's terms and conditions for owning a franchise under their brand. Each franchise under the original business is subject to following guidelines stipulating how the business is meant to be run. Here are some of the most common factors that franchise agreements must address when they are drafted:

  • An overview of the relationship between the franchisor and their franchisees
  • The duration of the agreement, including the length of the relationship, when the franchisee can enter new agreements, and requirements to upgrade the franchisee's particular location
  • Initial and future fees of entering and remaining a part of the franchise
  • The assigned territory that the franchisee can operate in
  • The ways in which franchisees can use intellectual property
  • Required advertising costs
  • Insurance requirements
  • What records franchisees must keep for auditing purposes

Since these documents are legally binding, franchisees are given 14 days to review the terms of the agreement before signing. It is also important to have an experienced franchise law attorney to help look over the agreement and make sure everything is in order.

With extensive experience in reviewing franchise agreements, Providence Law is uniquely suited to help franchisors draft these agreements and assist franchisees in negotiating for the best terms. Contact us today to find out how we can help you!

Franchise Litigation

Franchise litigation cases occur when franchisors misrepresent the opportunities that were originally presented to franchisees. Some of the most common issues that can cause these disputes include:

  • Territory issues
  • Royalty and marketing fee disputes
  • Breaches of contract
  • Fraud or misrepresentation
  • Wrongful termination and post-termination issues

While franchisors work hard to create systems and brands to help their franchisees succeed, these disputes can lead to unhealthy relationships between franchisor and franchisee.

Contact our Charlotte Franchise Law Team Today

We are a client-focused firm that is dedicated to finding creative solutions to complicated issues. Whether you are a franchisee or a franchisor, our talented team is ready to help you find an efficient and cost-effective way of resolving any disputes.

The many laws and stipulations surrounding franchises can seem daunting and confusing. At Providence Law, our team can help simplify the process with personalized services to help you find success. Contact us today through our website or give us a call at (704) 703-2910 to find out how we can help you!

About the Author

Jeremy Brasch

Attorney

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