For the successful business owner considering the franchised expansion of his or her business one critical question that must be answered is: How do you approach the preparation and development of your franchise agreement? That is, do you approach the preparation and development of your franchise agreement (and franchise disclosure documents) as:
(a) A legal obstacle that requires the preparation of generic agreements and disclosure documents;
(b) A collaborative process focused on the development of a critical asset that uniquely reflects, identifies and protects the components of your business (that is what has made your business successful), franchise, and franchise system.
Why do I ask? Because your approach will determine the ultimate outcome of this important process.
Approach (a) legal obstacle approach will typically lead to generic agreements and disclosure documents that, by all accounts, result in little (if any) value to a developing franchise system. While this approach may satisfy (or appear to satisfy) your regulatory disclosure requirements they do nothing to advance the development of your franchise system. That is, approach (a) typically leads to form over substance and not much else. When speaking with start-up franchisors that have followed this approach – an approach that they followed with the best of intentions but based on what may be poor advice – I am typically advised that their franchise agreements simply do not work for their business and franchise system.
For the start-up franchisor, approach (b) is the only true option. By following this approach your franchise agreement and disclosure documents will serve as core business assets that will reflect and protect the unique and critical components of your business and your newly established franchise system.
When starting a franchise keep in mind that all agreements are not the same and and that your input will be critical to insuring that your agreements and disclosure documents reflect the unique nature of your business. This is no easy task and is not one that is not simply delegated – an indepth working relationship with your franchise lawyer is required.