What You Wish You Knew Before Signing a Franchise Agreement
In "The Dirty Little Secrets Lurking in Your Franchise Contract" Stacey Alcorn a former real estate franchisee does a good job of remininding prospective franchisees about the unintended impact a franchise agreement can have on your future business options. Stacey mentions a few points that related to her franchise agreement‚ including the impact of the non-compete covenants. While your concerns (unless you are in a very similar position to Stacey) may differ from Stacey's‚ the overall point that she advances is that prospective franchisees need to consider the future impact of a franchise agreement.
There are many points that you should consider and evaluate before you sign a franchise agreement but please take some time and consider the following:
- Franchise Agreements are negotiable‚ especially within those younger franchise systems. So dont just assume that you must sign a franchise agreement "as is".
- The Future Matters‚ This is a point that Stacey communicates and the point is that you must consider the impact of the Franchise Agreement on your future business options‚ i.e.‚ what will you be doing if the franchise agreement expires or the franchised business is unsuccessful.
- Evaluate the Non-Competes from All Angles‚ Non-compete covenants are necessary provisions for a franchise agreement and it is proper for a franchisor to expect and demand that you agree to certain non-competition covenants. But you must evaluate the scope of the non-compete and most important if you are already in the business field for which you are about to sign a franchise agreement (i.e.‚ you are already a real estate professional and you are now about to become a real estate franchisee) then this is already your profession and you must modify the noncompete covenants to preserve your future employment and business opportunities‚ i.e.‚ after you are no longer a franchisee.
There are other factors to consider but they will largely be dependent on who you are‚ your business goals and your franchise expectations. So take the time to evaluate the future "what if's" before you sign a franchise agreement.
By Charles Internicola October 7, 2014
Franchise ChannelWhat Our Clients Say About The Internicola Law Firm
- Business Transactions
- Buy a Franchise
- Corporate Counsel
- Firm News
- Franchise Your Business
- Grow Your Franchise
- Intellectual Property
- Partnership Disputes
- Start a Franchise
- Do You Need to Have Multiple Locations to Franchise Your Business?
- Don’t Hire a Franchise Consultant if you see these Warning Signs!
- When is the Right Time to Franchise Your Business?
- How to Improve Your FDD Item 19 Financial Performance Representations in 2021 and Beyond (With COVID Impact)
- Should You Create an Education and Training Business Instead of Franchising?