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Common pitfalls when signing a franchise agreement

On Behalf of | Sep 5, 2019 | Franchise Law |

Owning a franchise can be a great way to have the freedom of owning your own business, with the support of a larger brand to get you started.

While often more affordable than getting started on your own, a franchise agreement can be expensive. It is essential to understand what the deal includes and what the requirements are for building the business.

Here’s how to avoid some of the common pitfalls when getting started with a franchise.

Know what is included

Perhaps the most significant benefit to opening a franchise is that the company you work with has already built a reputation and business model. They know their target customer and some of the best ways to get business in the door.

When you sign your agreement, make sure you understand the included benefits. Often, a franchise agreement will give you support in areas, such as:

  • Branded materials
  • Training
  • Recruiting employees
  • Marketing efforts

Read the contract carefully and make sure you understand your legal obligations, performance requirements, and financial commitments. You may also want to get an understanding of what other franchise owners do to be more successful. Also, make sure to carefully review the franchise offering documents that describe the overall franchise concepts.

Understand the rules and requirements

In a franchise relationship, you do not have complete operational control. While you will have some flexibility, there will be specific requirements that you must adhere to under the franchise agreement.

Before signing a franchise agreement, take a moment to consider the consequences if the franchise does not do as well as you hope. Some franchise agreements come with high costs if you do not meet specific production or sales goals.

Also, take the time to understand the business model and what you can and cannot do on your own. Talk to other franchisees.  Consult your attorney and other professional advisors.  Pose any questions in writing directly to the franchisor and understand what changes you can make at your location to customize it more to your location and what would be considered a violation of the agreement.