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Operating a franchise system may appear to be an easy way to earn passive income and increase the penetration of a brand into the marketplace; however, many well-meaning and savvy business owners find that their core company suffers under the weight of legal requirements and regulations.
Running a franchise network is not easy, and franchisors are legally required to follow certain legal requirements to develop the network. They may not shirk their responsibilities to themselves, the government, or their franchisees without causing massive problems, both operationally and legally.
A smart business owner will take every possible step to protect their company’s assets. For many businesses, these assets can involve patents, trademarks, or other forms of intellectual property. When offering a franchise opportunity, it is essential to first ensure proper federal registration of a trademark or, if no trademark is registered, then file the franchise at the North Carolina state level.
When the time comes to offer the opportunity to another party, be sure that the franchise agreement makes it clear that the franchisee is only purchasing a license to use specific aspects of the business. Many agreements will mandate special usage provisions or require the franchisee to produce only certain products with the brand or trademark.
The entirety of the franchisor/franchisee relationship is contained within the franchise agreement. Not only does this agreement contain key provisions concerning franchise fees and royalties, but it could also mandate methods of dispute resolution and what happens in case of a breach of contract.
Having an incomplete or vague franchise agreement could result in honest disagreements about the responsibilities of each party. By working with an experienced franchise attorney, business owners can ensure that a franchise agreement contains the necessary clauses to protect their rights and the value of their brand.
The obligations of a franchisor do not end with the signing of the franchise agreement. Most agreements will require that a franchisor provide training, guidance, and oversight over the activities of franchisees.
Not only is this required under the terms of the contract, but it is also a sound business idea. Always remember that a franchisee is an independent business owner who is using the reputation and brand of the company. A common mistake franchisors may make is not following the proper steps to ensure the quality of product and service from a franchisee as issues may reflect poorly on the company at large, affecting the bottom line.
Every party offering a franchise for sale in North Carolina must take the correct legal and business steps to give themselves the best chance for success. This includes securing trademarks and product rights, crafting clear and accurate legal documents, and maintaining oversight of franchisees. Consult with dedicated legal counsel about the common mistakes franchisors should avoid when preparing your business to expand. Call today to schedule a consultation.
