How Do I Protect My Interests as a Franchisor?
A franchise can be an extremely rewarding enterprise for both the franchisor and the franchisee. However, both parties have separate interests to protect so it’s important that all agreements are clear before any permanent commitments are made. Although the franchise is a joint venture in some ways, both the franchisor and the franchisee have some separate goals and concerns that can conflict. It’s a good idea for everyone involved to work with a business law attorney to make sure the agreements are mutually beneficial.
There are a large number of business law regulations that protect franchisors. When you want to enter into an agreement with a potential franchisee, you will need to create a document called a Uniform Franchise Offering Circular (UFOC). This is an extensive document that outlines the obligations that both you and the franchisee agree to.
It’s important that every part of the UFOC is written carefully to protect your interests. You have many concerns to address such as trademarks, copyrights and the territory limitations that apply to the franchise. A qualified business attorney can help you complete a UFOC or review the document before you make a commitment.
When you are creating the UFOC, you will need to consult with your account to help you prepare the financial statements necessary. This is a helpful practice because it gives you an extensive picture of the health of your company. You are required by business law to disclose complete financial information to potential franchisees. This practice is required because it gives the franchisee information about your company.
Your UFOC should contain specific details about the financial arrangements between you and the franchisee. A well-constructed UFOC will prevent misunderstanding between you and your business partners. Strong, up-front agreements prevent expensive lawsuits. Your business law attorney can advise you about common problems that franchisors experience. Then, you can work with the attorney to construct contracts that are designed to avoid these common issues.
Business law protects franchisees in some ways, but they don’t protect them in every situation. There are issues to consider such as bankruptcy, operating agreements and initial investments. An experienced business attorney can help you avoid these situations by constructing the franchise agreement properly.