Operating a franchise is sort of like owning a branch of the family business — you get to run the show, but someone with more experience has the authority to regulate almost everything you do. This can be the perfect environment for a new business owner in the right circumstances. Read on to learn more about how to decide if a franchise and its circumstances are right for you.
Franchise relationships are generally governed by contract law and federal franchise rules. In addition, some states have specific statutes governing franchise relationships, but Pennsylvania does not. Instead, Pennsylvanians must look to the Federal Trade Commission’s (FTC’s) rules for guidance.
Entrepreneurs must also understand the terms of a specific deal offered by a franchise. Key components should include:
- Franchise Agreement. Usually drafted by the franchisor, the agreement will include the terms and conditions governing franchise ownership and operation. Important points may include franchise fees and costs, assignments, and advertising requirements, termination, and renewal, among others.
- Franchise Disclosure Documents. Under FTC rules, disclosure documents must include 23 different aspects of the franchise, such as existing locations, required fees and costs, franchisor bankruptcy and litigation history, and audited franchisor financial statements.
- Franchise Marketing and Sales. Determine at the outset whether the franchisor offers (or requires) field training and support, marketing support, compliance support, and ongoing research and development of products or services.
- Dispute Resolution. Decide whether your dispute will be addressed through litigation, arbitration, mediation, or a combination thereof, who is responsible for the costs incurred for dispute resolution, and who has the final call in selecting a forum, mediator, or arbitrator, if applicable.
Consider these basic aspects of a potential franchise relationship before investing. For a more detailed analysis of your particular situation, contact the attorneys at the Scolieri-Beam Law Group, P.C. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can advise you regarding your franchise questions, or any other question related to your business. Contact us today at (412)765-0546 or via email at info@scolierilaw.com.