Entering into a franchise agreement is an exciting enterprise. You will take on reduced risk because you are joining an established business, and you will benefit from a loyal customer base and established brand recognition. However, before opening the business and making it your own, you will have to sign a franchise agreement. Before you do, you should always speak with an experienced franchise agreement attorney who can review the agreement and help ensure you are not signing away your rights. Contact Beth Santilli Law, LLC today for assistance with franchise agreements.
Request ConsultationFranchise Disclosure Documents (FDDs) vs. Franchise Agreements
Many people use the terms “franchise disclosure documents” (FDDs) and “franchise agreements” interchangeably, but there are differences.
FDD
By law, franchisors must provide franchisees with an FDD that contain important information about the business. The information included in an FDD is crucial for franchisees, as it will determine whether the franchisee wants to enter into business with the franchisor. The FDD is regulated by the Federal Trade Commission.
Franchise Agreement
A franchise agreement is a legally binding document. The agreement creates a business relationship between the franchisor and the franchisee. The franchise agreement will include many of the same provisions as the FDD, but it will also outline what the franchisor requires from the franchisee during business operations. Franchise agreements typically remain in place with little or no changes for the duration of the business relationship.
Terms Included in Franchise Agreements
Due to the fact that franchise agreements are legally-binding documents, it is imperative to understand the terms included within them. The most common terms associated with these agreements include:
– Personal guarantees: Personal guarantees are not unusual in franchise agreements. Your attorney can review a personal guarantee to ensure the language is not unduly limiting.
– Non-compete clauses: Chances are that if you are interested in one type of business, you are likely interested in similar businesses. As such, if your franchise agreement includes a non-compete clause, you should seriously consider whether you want to sign it or not.
– Legal limitations: Franchisors sometimes require their franchisees to sign away their rights regarding the type of legal action franchisees can take against the franchisor. For example, many franchisors will include an arbitration clause, meaning that disputes will be settled by an arbitrator rather than through the courts. Beth Santilli Law, LLC can advise you regarding the potential drawbacks of agreeing to an arbitration clause.
Get Legal Help Today
If you are considering purchasing a franchise, it is important to speak with a knowledgeable franchise agreement attorney. At Beth Santilli Law, LLC, we can review and explain both the FDD and the franchise agreement. We can also help negotiate the best terms possible for you. Before you sign any agreement, contact us today to speak with our experienced attorneys.
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