Franchise law is a big part of what you must navigate as you prepare to make big money in franchising but it is worth the effort.

When you get ready to offer franchises of your prosperous business, it pays to be aware of franchise law issues that must be handled just right. When it gets right down to brass tacks, that franchise agreement that you sign with each and every bright eyed new franchise owner is a legal document.  The new franchise owner is committing to get in there and roll up his or her sleeves and make that franchise work.  That commitment includes a long term time frame where nobody cuts and runs, lots of hard work and big piles of money as well. And when money is involved in a business relationship, there are contracts.

There is no getting around that the government big shots have their noses in the middle of the franchising process in a big way. That is not necessarily a bad thing. Since the FTC has become more active in managing franchise law, the business phenomenon of franchising has taken off like a rocket ship. So clearly, for once the politicians are helping more than they are hurting.

That said, you should be on top of what is required by franchise law as you start to roll out your franchising business.  That advice is especially true when it comes to franchise documents such as the franchise disclosure statement. The all important franchise agreement is what makes everything legal and puts you and the new franchise owner in a legally binding relationship that some have suggested is even harder to get out of than a marriage license.

Finding the right franchise lawyer.

It makes sense that early in your discussions about launching into the world of franchising, you should get a good franchise lawyer involved.  Now you may think you have enough lawyers working with your company to recreate the OJ trial but think twice about simply calling in your general corporate attorneys to handle the complicated issues of franchise law and how to properly prepare franchising documents to strike the right kind of deal with future franchise partners.

Franchise law is a very specific area of government regulation. A lot of money is on the line when those franchise agreements kick in.  Not only do you call for some serious cash from the franchise owner in franchise fees, but when the big profits start to roll in, franchise royalties can fill up everybody’s’ bank accounts. To make sure that every franchise document you present to that future franchise owner is absolutely kosher, look for a franchise lawyer who specializes in this area of business legal representation.

The details of franchise law get even more complicated when you factor in franchise law for the state where the franchise buyer resides and does business. This can get pretty complicated if you begin to sell franchises in many states. The anti gets upped even more when you take your franchise empire international. You want a franchise lawyer who knows how to deal with the many layers of franchise law each step of the way. If you get that kind of help and you do all you can to understand franchise law in your daily dealings with your vast army of franchise owners, the results can be very rewarding indeed.

 

 

Living up to franchise licensing that is in compliance to state and local franchise laws is not optional.

Franchise licensing is a formal way of saying that to be in a franchise relationship, everybody has to play by the rules.  The rules that are the “big brother” over the franchise world are set both by the federal and state governments. Just as nobody wants to get in hot water with the IRS, to fail to live up to franchise law could mean that your franchise licensing will become a fond but distant memory.  If that doesn’t light a fire under you to live by the rules, nothing will.

The priority to be very fussy about maintaining a clean nose with the franchise licensing big dogs must be just as high for the franchising company as it is for the franchisor.  When you set out to franchise your business, the idea is not to just have one or two franchisors out there.  The big names in franchising like Starbucks or McDonalds have hundreds if not thousands of franchisors. Every one of those franchise owners but live up to the terms of franchise licensing both at the federal and state level.

You cannot run around behind that many franchise owners to know that they will not put your franchise licensing at risk.  The heart of how a franchisee manages the problem lies in those franchise agreements that get so much discussion as you enter into a franchise relationship with a new franchisor.

You can put some teeth into those franchise agreements. You can put as much detail as you need in those franchise documents to feel you have covered your bases to spell out to a new franchise owner exactly what is expected of them to protect their franchise licensing and yours as well.  In fact, it is smart to customize those franchise licenses by state so that you cover any quirks in franchise licensing laws that some states may throw into the mix.

Checking up on the other guy.

As a potential franchise owner, the idea of worrying whether the company offering a franchise to you is in compliance with the laws covering franchise licensing may never have worried you. You should let it worry you. The last thing you need is to sink your life savings into buying a franchise only to find that they are in legal hot water for not living up to the regulations covering their franchise licensing.

You can check up on the other guy before you even consider signing a franchise agreement with that business.  You can do some snooping around to find out how long they have been in the franchising game and if they have run afoul of franchise licensing legalities so far.  If you smell trouble during that background check, run!

In addition, be sure that the franchise agreements and other pertinent binding franchise documents are just as tough on the franchisee as they are on you about keeping their nose clean with the franchise licensing authorities. If the language of those documents is written to protect you in case there is a problem with franchise licensing at the mother ship, you will be glad you took the time to protect yourself going in.

The legal requirement that franchising documents must be understandable to the average person impacts franchisee and franchisor in different ways.

Franchising documents must be understandable to the average person.  That is more than just a cute idea.  It is part of franchise law.  Since franchising documents originate with the franchisee, you take the kick off on making those documents complete and accurate but also so any average person can read them and get what you are saying.

This can be tricky.  Franchising documents are, after all, legal documents that will eventually become signed and binding agreements between you and every small business person who buys a franchise from you. So cannot just lock the doors and not let the lawyers take a crack at making sure the franchising documents are right.

What you can do is to have your franchising documents reviewed by “average people” that you have hanging around your offices to make sure they can be understood by a potential franchisor. Obviously, you have to assume that the concept of the average person means you are writing your franchising documents to be understood by adults with sufficient education to run a business and be successful dealing with the many financial and legal issues that all grown ups deal with.

The idea here is to cut down on the legal mumbo jumbo.  Have your “testers” jump all over any legal terms that show up in those franchising documents.  Let them ask questions about terminology such as, “What does this mean?”  If some legal terminology pops up in your franchising documents that confuse your testers, some rewrites are in order.

A franchise lawyer or no franchise lawyer? That is the question.

For those who are launching out on the adventure of buying a franchise, brace yourselves.  You are going to be seeing a number of franchising documents show up and it is important you read them and understand them. The understanding part is the important thing because what is written in those franchising documents well, in essence, be the story of your life when you own that franchise and you are an active partner with this strange creature called a franchisee.

You can expect those franchising documents to be understandable by you without the aid of a lawyer. If they are not, you should not be afraid to let the franchisee know that you are having trouble because you have the law on your side that the documents should not be a jumble of legal terms.

You may wonder if you should retain the services of a franchise lawyer as well before you sign those franchising documents.  The answer is yes but not necessarily right away. You should be able to read them and grasp the ideas there without the help of a high priced legal team. But since the step of signing those franchise agreements is a legally binding  step, it pays to have your own franchise gurus look over what is there to make sure the documents line up with state and federal franchise law and that there is nothing missing that you need in there to cover your back.

It is just a smart idea to have your own legal eagles on board to watch out for your interests.  Signing those franchising documents is the start of your new life as a small business owner running a very prosperous franchise operation.  Make sure you start it out right by handling those franchising documents with care.

There are a huge number of franchise regulations on the books but most of them are there to protect the franchisor.

Franchise regulations are an important part of what you must go through to buy a franchise and achieve your dream of great wealth as a small business person. It is easy to look at the huge volume of franchise law and think that, once again, the government is sticking their nose in somewhere that they do not belong. In reality, however, most franchise regulations are put in place not to protect the franchisee but to protect you as you work through the process of buying a franchise and getting that dream business that you have always wanted.

As you work interact with the company offering you a franchise, you will see what seems like volcano flow of franchise documents come your way.  Many of those documents are filling up your mailbox because franchise regulations require that a lot of disclosure happens before you fork over your hard earned money to buy a franchise and set up shop.

Disclosure is a seventy five cent word that simply means that the franchisee must inform you about everything that will happen as the franchising process takes place. Disclosure is also part of franchise regulations because they are required that you know about any and all requirements that you will have to live up to as a franchise owner.  You also have a right to know about what you can expect and demand of the franchising company so they hold up their end of the bargain too.

Understanding the distinctions between state and federal franchise regulations is important.

If things were not messy enough, there are different levels of franchise regulations to be aware of. Before you sign any franchise agreements, it pays to know where state level franchise regulations are in place and where the federal government steps in to add their two cents worth.

One reason to be alert about the different levels of franchise regulations is that if you run into a problem down the road and the franchisee is in another state. If that happens, there could be confusion on how responsible that company is to regulations that pertain to the state where you live. So it is smart to be aware of these distinctions and look for how they might impact the franchise agreements and other documents that you are reviewing as you prepare to buy a franchise and get moving on your exciting new business.

You should not hesitate to get some help form a qualified franchise lawyer or franchise consultant to sort the various franchise regulations out for you.  By engaging someone local, they will be well aware of the state franchise laws.  Your franchise gurus can also interact with the franchise legal brains at the franchising company to make sure they lay out the details of who is responsible for what. Then you can feel confident that you are going into this deal with someone watching your back.

 

 

Franchise law is there to protect you, but getting some help to understand it is a smart move

Franchise law is an area of regulation that is not the evil enemy of anyone who wants to buy a franchise. The fact is that franchise law is there to keep both franchisee and franchisor from losing their shirt in a bad business deal.  For that reason, it pays to understand the role of franchise law as part of the hoops you must jump through to buy a franchise and to know how to jump through those hoops correctly.

One reason it is smart to get some help in the tricky area of franchise law is that the specifics of how to enter into a franchise agreement can change depending on where you live and where the franchisee is located. Too often, the scale is slanted toward the franchisee that may be a large organization.  As you start to sort out the weird rules and regulations just to buy a franchise, you may get a bulky package of franchise agreements and small print rules and regulations that represent the franchise law you are expected to understand.

Don’t be too hasty to rush through that huge stack of forms and franchise laws. For one thing, the more you can wrap your head around franchise law, the better off you will be.  Don’t let the franchisee bully you into thinking you have to sign every form exactly as it is written.  You are a smart one if you have those forms looked over by a franchise lawyer who has your back.

Pick some brains and tap the value of some great franchise legal forms templates and you get the best of both worlds.

Getting a franchise lawyer and a franchise consultant on your side will give you some leverage when sorting out all of the details of franchise law before you begin your partnership with the franchisee. Don’t get the wrong idea that just because the franchisee buries you in paperwork that they are out to get you. Much of the franchise law is there for your benefit too. But franchise law is like all laws that are written by politicians and lawyers. It is tough for normal human beings to figure them out.

Along the way, you can and should pick the brains of those franchise experts that become your dream team.  That is because franchise law does not end when you win your franchise and start setting up shop. There are aspects of franchise law that will kick in every day you are in business. You cannot keep your high priced franchise experts around the store everyday. So let them teach you the real nuts and bolts of how to operate a profitable franchise and stay kosher with the franchise laws you singed up for. If you do that, everybody will be better off.

 

Franchise Registration States and State Franchise Laws – part II

If you are already preparing to launch your franchise, you are probably well aware of all Federal and state laws governing franchise business activities. Some states are known as easy states as the regulations maintaining franchise activities are minimal. Other states however have many and complicated laws and much consideration should be taken if you are setting up your franchise in such state.

Compliance with all Federal and state franchise regulations is paramount. If you fail to comply you may end up paying thousands of fees and even be banned from dealing with franchising! This is why it is much recommended to use the services of experiences franchise attorney. They will review all your documents as well as all your advertising materials.

Franchise state laws and regulations overview.

• Indiana. If you are opening a franchise in the state of Indiana, you must register it in the Division Office of Secretary of State. You need to file your disclosure documents prior to offering and selling. This is why you need to be registered in the state even if you only plan to make a few franchise offers. There are also some franchise law restriction related to termination and transfer of franchise units.
• Maryland. The registration of franchises is done at the Office Division of Securities. You are not allowed to sell or even offer franchises until you complete your registration and have your documents approved. There are franchise laws specifics regarding the way you will advertise your franchise. Similar to some other states, your ads cannot in any way show or discuss profits, earnings, revenues or imply that your franchise is free of risks. In addition you need to submit every advertising material to the Office Division of Securities 5 days prior to its release. There are also some exemptions of registration – for example franchisors that require more than %750,000 initial investments are exempt of registration. Internet offers are also exempt of registration.
• Michigan. Michigan is one of the “easy” states for franchisors. It is a notice only state and this is why the so called registration is much simple that the process in other states. You must register your franchise at the Department of Attorney’s General. The registration is called a “Notice of Intent”. There is a registration fee of $250 that must be paid along submitting the registration documents. According to the state’s franchise regulations, you do not have to submit your franchise disclosure documents.
• Minnesota. Franchises are registered at the Minnesota Department of Commerce and the registration fee is $400. Your franchise registration application must be notarized and you need to enclose costs and sources of fund documents, Uniform Consent to Service of Process (also notarized), your disclosure documents, Franchise Impoundment Agreement and Franchisor Surety Bond. The last two documents are required as condition of registration. You will need to submit all of your advertising materials. There are special laws regarding motor vehicle fuel and hardware franchise businesses as well to those that require $200,000 or more capital investment from their franchisees.

Franchise Registration States and State Franchise Laws – part I

As start up franchise business owner you are probably already very well aware of your state franchising laws. On the other hand, if you are still working on your business and marketing strategy, and you are planning to expand nationwide, you will need to take into consideration the franchise laws in all of the states where you plan to expand. Moreover some states require that you register there even if you only plan to advertise your franchise on their territory.

There are 14 franchise registration states in The United States. They all have different franchise regulations. We have listed some of the key points in each state franchise laws and regulations. However it is strongly recommended that you consult a franchise attorney experienced in franchise law and registration procedures in each of the states where you plan to offer or sell franchise units.

US state franchise laws.

• California. According to California Franchise Investment Law and California Franchise Relations Act a franchise is the agreement between two parties, where one party gives the right to the other to use their trade name in exchange of a fee. In order to offer and sell franchises, you need to register your franchise. Visit the California Department of Corporations. There you can obtain all the legal forms and documents required. You will also need to pay a registration fee. You also need to know that every offer and sale you make must be registered with the Commissioner of Corporations. This is done with a Uniform Franchise registration Application. There are exemptions of this rule so you need to check with a lawyer about the specifics. If your business is dealing with automobiles, fuel, construction and beer, you will also need to comply with more industry specific regulations.
• Hawaii. Registration of franchises in the state of Hawaii is done through the Department of Commerce and Consumer Affairs. Similar to several other states, you will not be able to offer or sell franchises until you are registered at the state and until your disclosure agreement is approved.
• Illinois. As with the states discussed so far, offering and selling franchise units before you have registered your franchise business and have your disclosure documents approved is considered law offense. Franchise registration is done at Illinois Attorney’s General. According to state’s franchise regulations, franchise anniversary dates automatically expire 120 days after the end of the financial year. Moreover you no longer need to register your franchise brokers as you needed to do just several months ago. The registration of large franchises ($5,000,000 and $15,000,000) are processed faster and there is a $500 registration fee. Very large franchise (above 15 million) do not need to register, but they do need to provide their disclosure documents to prospective franchisees prior to signing the agreement.

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