Is Franchising Right for You?

franchise lawyer NYC

The moment you decide to go to a drive-thru and pick up something to eat, chances are, you’re supporting a franchise. From fast-food to fitness gyms, franchising has made it easier than ever for anyone to start a business. It’s a huge part of the economy and directs many of our daily routines.  

What is franchising?

In short, franchising starts when a company decides that it’s doing well and wants to expand. Expansion is important for growing your business, but it can be a pain to try and run all these new locations. Rather than running all these locations themselves, businesses will essentially lease their business model and name to someone based in the new location. The person on the other side of the coin is called the franchisee. They dream of starting a business, understand the local market, and has access to capital to start a business or can be approved for a loan. Many of these people also may be new to the industry, thus lacking intimate knowledge of it. In other words, a franchisee may not want to risk going into the business world by themselves, without a proven product or system.

Franchising allows these individuals to make a deal with a company that is recognizable to consumers and already has a proven track record. The franchise supplies the franchisee with the tools necessary to set up an extension of their business, and in return, the franchisee takes a training course, pays an initial franchise fee, and come to an agreement. This agreement, especially when franchising with a food chain such as McDonald’s, usually has strict guidelines the franchisee must follow. Sometimes even as stringent as determining what type of toilet paper must be used in the bathroom. There’s also a royalty fee that the franchisee pays, which is usually about five to ten percent of the profits. Always have a franchise lawyer NYC review your agreement before you sign any agreement or contract with a franchise.

So, is franchising for you?

The answer is complicated. If you’re an entrepreneur who is new to the business world and want to learn from some of the most successful companies in the world, franchising may be for you. A franchise, however, doesn’t guarantee success. But if you’re risk adverse and don’t want to spend the time and money creating a business from scratch, franchising may be a good option. But in the end, you don’t own the business and you have to adhere to the company’s stipulations. If you do decide that franchising is right for you, be sure to hire a franchise lawyer NYC to help you understand what’s in your agreement and how it will impact your bottom line.

4 Reasons to Hire a Franchise Lawyer Before Signing an Agreement

franchise lawyer NYC

When preparing to purchase a franchise, there are a few things you’ll want to do prior to signing any documents. First, you’ll want to talk to several other franchisees to get all your questions answered and work on drawing up your business plan. If possible, you may even want to consider visiting the franchise headquarters.

Even after doing all you can to prepare and learn as much as you can, there is still one big thing left for you to do: protect yourself legally. In order to do this, you’ll need to hire a franchise lawyer NYC. Here are four reasons you need an attorney to help you with this last step.

Lawyers Know What Matters Most

By law, all prospective franchise owners are required to receive the Franchise Disclosure Document (FDD) prior to completing the purchase of a franchise. Within this large document, anywhere from 150-300 pages will be information covering everything the Federal Trade Commission (FTC) feels is imperative that you know about the franchisor. It is imperative that you completely understand the intimate details of this document as there will be certain restrictions and obligations that you’ll have to abide by, otherwise you could be terminated.

A franchise lawyer will know exactly what you need to focus on when reviewing the FDD and the actual franchise contract. Chances are, most attorneys have written an FDD themselves, so they know what to look for when reviewing one. They will also be up to date on all the current, ever-changing franchise laws that you might not be aware of.

Advise You on Choosing a Business Entity

Along with providing valuable information regarding the FDD, a franchise attorney will also be able to provide you with suggestions on how to best set up your new franchise business. Is it going to be in your best interest to establish a Limited Liability Corporation (LLC)? A Subchapter S-Corporation? Or a C-Corporation? Do you know the difference between corporations well enough to make the decision yourself? It is going to be crucial to select the right entity for your new franchise, as it will determine your legal rights and liabilities as a business owner. Additionally, the type of corporation that you establish will also determine how your business is taxed.

Provide Assistance if Things Go South

When people buy into a franchise, they don’t do so expecting to fail. Unfortunately, unseen circumstances may arise making it hard for you to succeed. In some instances, you may be forced to close your business. In this case, having a franchise attorney can prove to be beneficial.

Franchise Development Claims You Don’t Need One

A franchise is going to have their own best interest at heart, which is why if they ever tell you that you don’t need an attorney, ignore it. Because the FDD is a lengthy, complex document they have the sole objective to get it signed without any negotiation. This is because most franchise development directors are salespeople, whose sole objective is to get the agreement signed. This is where having a lawyer who understands these types of documents can advise you on negotiating prior to signing anything.

Before purchasing into a franchise in New York City, hire a franchise lawyer NYC, such as Warren S. Dank, ESQ., P.C., to protect you and your interests. With years of experience, you know you can trust Warren S. Dank with all your franchise transaction needs.