Owning a franchise gives people the opportunity to work for themselves and build a business. When considering becoming a franchisee, the contract should be carefully reviewed. It is also wise to have a corporate business attorney review the contract and discuss any question or concerns of the buyer.

Before signing the agreement, these facts should be understood:

1. Strong franchise companies usually have non-negotiable agreements. Having each franchisee on the same program helps the company to see the maximum benefit and could also help the franchisee to be successful. This is the main reason the contracts are non-negotiable.

1. If a company is willing to negotiate substantive provisions of the agreement, it could be a warning sign.  An established company should be confident in the value of their brand and with their operational system and therefore would be expected to be more rigid in the franchise agreement.

1. Franchise agreements are usually unilateral. The agreement is written from the company’s perspective. Some can perceive this as a negative aspect, but that’s not necessarily the case. The main goal of the agreement is to protect the franchise system as a whole.

1. There will be rules and restrictions. The contract will outline operational activities for the business. It is important to appreciate these rules and requirements are in place to help the franchisee successfully operate the business. One of the benefits of purchasing a franchise is the past experience and success of the company. A business attorney can review the contract and help prospective franchisees to fully understand these rules and restrictions prior to entering into an agreement. If the agreement seems too restrictive, it may not be the best business match for the purchaser.
2. The franchise agreement might restrict the franchisee’s ability to sell the business. Usually the contract is set for 10 to 20 years, but most franchisees leave before the end of the term.  Generally the agreement will explain the conditions of a sale including requirements applicable to the new purchaser. Often the franchisee is required to offer the franchise company a first right of refusal to purchase the business on the same terms and conditions as a third party buyer.
3. The company can make changes to the agreement. In most franchisee agreements, there is a clause allowing the company to make changes without recourse by the franchisee. Franchisee owners should be aware of this clause.
4. As a group, franchisees have a lot of power. If the franchise company is over demanding, franchisees as a group have significant influence. Because virtually all of the company revenue is coming from the individual franchises, the company usually seeks franchise support.

Those entrepreneurs thinking of opening a franchise should look over the contract carefully and enlist the help of a business attorney, such as those at InnovaCounsel. It will make the process easier, and ensure as much protection as possible in the agreement.