If you are considering expanding your business you may have thought of franchising. The definition of a franchise is a business that contains the following three elements, all of which must be present for a business to be deemed a franchise: (1) use of another’s trademark, (2) substantial control or assistance by another; and (3) a required payment of $500.00 or more within six (6) months after commencing operation of the franchisee’s business (which can include payment for goods or services). The court interpretation of each of these elements has been very broad and has even extended the definition of a franchise to include business relationships more commonly referred to as licenses or distributorships. Therefore, many owners of businesses which are legally subject to franchise laws are not even aware of their failure to comply with the law.
Taking your successful business model and offering it to others through the franchise process is often an excellent way to grow your brand, increase your market penetration while earning royalties and franchise fees along the way. It is often a great way to take a strong local or regional brand to the national level.
The process of developing and selling a Franchise Offering is highly regulated and the penalties of failure to comply are painful. In addition to various state regulations, the Federal Trade Commission has specific guidelines that must be met to ensure that you comply with the law before you can offer your franchise to buyers. These requirements include, among others, that you provide a Franchise Disclosure Document (FDD) to each prospective franchisee at least 14 days prior to allowing them to sign a binding Franchise Agreement. The contents of the FDD are further regulated by the FTC and states which dictate what must be included. Additionally, several states require specific filings to be made with the state and some require certain approvals before you may lawfully offer a franchise for sale in that state. The process of drafting required documents and filing required paperwork with various states can take months so it is best to get started early if you have a specific time goal in mind. If you’re ready to franchise your business, we are ready to help.
Our goal is to ensure that your franchise agreement is legal and that all documentation is properly drafted. Franchising your own business is exciting and important landmark in your professional career. Don’t let this important accomplishment cause you legal anxiety — allow us to handle the legal matters so you can enjoy the fruits of your labor!
We offer reasonable rates for new Franchisors on initial Franchise Disclosure Document (FDD) and Franchise Agreement (FA) drafting to fit the needs and objectives of your business model.