As a franchise lawyer you would think that I am used to this by now‚ but I am not. What I am referring to is the inadvertent (at least I hope so) disregard of the franchise laws and regulation by extremely successful and well intentioned business owners who have expanded their brand through license agreements that are nothing other than a disguised franchise. These business owners (none of which are my client) have adopted “license agreements” that – other than avoiding the actual word “Franchise” – are absolutely franchise agreements. That is‚ these license agreements:
Not only do these “license agreements” create a road map that would lead a regulator to absolutely conclude that a franchise relationship has been established‚ they actually take it a step further and include agreement language whereby the “licensee” agrees to obligate itself to assist the Licensor in converting the Licensee’s “licensed business” into a franchise‚ should Licensor later “apply to become a franchisor”.
Judging by the number of proposed “license agreements” that I have seen recently‚ I question and ask you to question the following:
MY RECOMMENDATION: When it comes to franchising‚ there are no shortcuts. “Dressing up” your franchise as a license‚ in the long-term‚ will not work and is not worth the future cost or risk.
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