Key Facts You Should Know before Opening a Franchise in Texas
If you are contemplating a franchise business venture, make sure you understand the nature of a franchise, including the benefits and drawbacks of these arrangements. While you may be the owner and operator of your business, at least part of your decision-making authority will be governed by the franchise agreement and beyond your control. On the positive side, a well-structured franchise can be a great place for you to learn the ropes of operating a business which has already been successful elsewhere, with oversight from experienced entrepreneurs.
Where can I find the rules regarding franchises?
By and large, franchise relationships are governed both by contract law and Federal Trade Commission (FTC) rules. Franchise agreements vary as much as the types of businesses they represent, but there are several key components to a franchise arrangement you will need to understand before you commit to owning and operating a franchise. Common parts of a franchise arrangement include:
- Disclosure Documents —The Federal Trade Commission promotes transparency in franchise arrangements by requiring disclosure of information such as other existing franchise locations, necessary fees and costs associated with operating the franchise, rules you must follow, franchisor bankruptcy and litigation history, and audited financial statements of the franchisor. Regardless what they say in the sales pitch, review the disclosure documents with a fine-toothed comb.
- The Franchise Agreement — This contract should clearly state the terms and conditions of ownership and operation of the franchise, including important information such as franchise fees and costs, assignments, advertising requirements, termination and renewal options. This document is almost always drafted by the franchisor, so read it carefully.
- Franchise Marketing and Sales Requirements — Many franchisors offer field training and support while you get your business up and running. Often, this training and support is mandatory. Other mandatory involvement by the franchisor in your business may include marketing support, compliance support, and ongoing research and development of products or services. Make sure you have a clear understanding of what is offered and how much of it is mandatory.
- Pre-defined Dispute Resolution — Almost all commercial contracts these days predefine your options in the event you find yourself in a contract dispute in the future. The contracts you sign in the beginning may restrict your future dispute resolution options, so be aware of any rights you are being asked to sign away.
Seek legal advice before signing contracts
Contracts vary greatly from one franchise to the next. One of our experienced Bryan-College Station, Texas business law attorneys can review your proposed franchise arrangement, explain contract clauses and help protect your best interests. Before you invest your time and money, contact the Peterson Law Group to make an appointment at 979-703-7014 or fill out our online contact form.