Franchising comes with serious legal protections for you!
When weighing the benefits and drawbacks of a franchise model compared to a traditional small business model, many people often forget to take into consideration the significant litigious benefits of a franchise! Be sure to read the small print – there are some serious perks to be had for franchise owners that are not available to all small business owners.
Franchising is regulated at the federal level, meaning that the Federal Trade Commission (or FTC) offers your franchise certain protections and allowances because of your registered franchisee status. The most simple of these is that the franchisor must allow you to use their trademarks and, in exchange, you must provide the franchisor with at least $500 within the first six months of operation.
One of the most critical benefits that you’re provided by the FTC as a result of your franchisee status is a Franchise Disclosure Document (or FDD). This FDD is the most important paperwork that will pass hands during your entire franchising agreement because it allows you to do extremely thorough due diligence on what you’re buying Your FDD will disclose to you any litigation they have come up against, a list of all franchisees (including addresses and turnover rate, terminations, reasoning, etc.) Though not required by law, your franchisor may also include earning potential projections for your specific franchise; it’s always a good sign to see this information included as it indicates confidence on the part of the franchisor.
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It can often be helpful to have someone to help guide you through the complicated and confusing legal portions of your franchise purchase. Legal negotiations and disclosures can be the most critical part of the process and it’s important that you make appropriate and sound decisions.
Careyann Golliver, a FranChoice business consultant in Denver, Colorado, can be that guiding light in your entrepreneurial journey. With over two decades of experience in entrepreneurship and franchising, she can provide critical feedback and guidance. Contact Careyann today 720.542.3548 or firstname.lastname@example.org, or visit her on the web at careyann-golliver.franchoice.com.