Buying a franchise is a great way to start and run your own business. A franchise may offer plenty of benefits because a lot of the hard jobs of organizing and developing the business have already been completed. A business contract is often very complex and potential business owners need some tips for evaluating a franchise agreement before making a purchase.

Review the Contract

Every franchise agreement may be different. In order to be able to properly compare franchise options, you must understand the contract. There are many different clauses and sections that comprise the contract. Although the contract is usually large, it is necessary to read each and every section in order to have complete knowledge of it. Make note of any areas that are unclear, or difficult to understand. It can be helpful to speak with current franchise owners to find out their advice and recommendations, and to learn about any serious concerns.

Hidden Fees

Contracts are often complex, and franchise agreements are no different. There may be certain fees or responsibilities that are placed within the legal clauses of the document. These need to be reviewed because they could cause financial or legal problems in the future. When fees are hidden, it makes comparison of franchise contracts more difficult. It can also mean that there are other things that could be buried within the document.

Restrictions

Franchise owners want to protect their company, so they often make the franchise contracts quite restrictive. Some restrictions could prevent you from advertising or marketing in the way that you want. Other restrictions could include non-compete clauses, insurance requirements, and renewal options. There may be a mandatory arbitration clause in the contract, which could restrict you from taking legal action should a dispute arise. These issues and others must be noted so that you understand your responsibilities.

Terms of the Contract

Every contract includes terms that apply to such things as payment, how long the contract lasts, the territory that applies to your franchise, and other important data. Some of these terms could make it more difficult to make a profit. Additionally, the contract needs to be checked with regards to the local, state, and federal laws that apply. In order to ensure that you can comply with the contract, and that the contract is in accordance with the law, it is advisable to have the franchise agreement examined by an experienced business lawyer.

This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Evaluating a Franchise Agreement, or any other litigation matters, please feel free to contact Roger C. Decker at  480.461.5343, log on to udallshumway.com,  or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.