Legal Questions To Ask Before Buying A Franchise
A franchise agreement is the legal document that dictates the relationship between the franchisor and the franchisee to some great extent. So, be clear in all the clauses and terms of the franchise agreement. Also make sure that you are represented by a franchise attorney who knows how a franchise system works. Below are some questions to help you in the legal department before you buy a franchise.
• Are the terms negotiable? In most cases, especially for top franchise operations, the answer will be no. But, some provisions of the new franchise concepts can be negotiated.
• How soon can I sign the franchise agreement? Before you sign the franchise agreement, you are supposed to read the UFOC properly and attend discovery day. This time-period, given for due diligence, is essential to find out essential details about the franchise opportunity. So, many times you cannot sign the franchise agreement right away.
• Do I have to sign a disclosure document? Both franchise agreement and UFOC will contain confidential reports of the company’s performance. Hence, when you get to see them, you have to sign a document stating that you won’t disclose the reports to any third-party, even if you don’t buy a franchise from the company ultimately.
• Is there any clause that can cancel my franchise agreement? The franchisor is supposed to maintain a strict uniformity in all its franchisees. So, it may insert certain clauses that, if broken, may lead to withdrawal of franchise right.
• How much do I have to comply with the laid-down rules? A few franchisors leave some space for the franchisees on the issue of complying with their rules whereas some may give a period of warning to rectify the mistakes, before taking punitive action.
• What is the process, if I want to offer my franchise business for sale? Various businesses cover this aspect. While some take a portion of the sale amount, others offer to buy back.
• What is the course of action, if I have any grievance? Top franchises will try to make sure that this situation doesn’t arise. If it happens, many put in rules mentioning that the issue will be taken by arbitration panel before a court.