Turning a successful company into a franchise can be an excellent way to earn income without all the commitment and work of traditional expansion. Although another business owner will handle the day-to-day operations of the company and will be legally responsible for that company’s success, franchisors still have certain legal liabilities to provide a fair chance to franchisees.

These obligations include taking steps to register the business opportunity you are offering with the State, drafting necessary franchise disclosure documents and contracts, and proving the necessary training and support required by a master franchise agreement. Sometimes these federal requirements can hamper the vision and drive that got you to where you are today, but a franchise business lawyer could help handle these aspects so you can focus on running your business.

Our franchise business attorneys could provide the legal guidance needed to start your North Carolina franchise today. A Charlotte franchise lawyer could help you along the road to turning your successful business model into a national franchise.

Steps that Every Party Offering a Franchise Must Take

Business owners may make the decision to offer their business model and intellectual property to other potential owners in the form of a franchise. However, they cannot simply advertise this opportunity and strike a deal over a handshake. North Carolina law requires all potential franchisors to register their franchise as a business opportunity with the North Carolina Secretary of State. Under North Carolina Statute §66-97, this includes submitting two copies of a franchise disclosure statement as well as a $250 registration fee.

Another vital step is creating the legally valid franchise disclosure document. These documents contain vital information to inform potential buyers about the franchisor and business plan. This disclosure should include:

  • The name and corporate structure of the seller
  • The seller’s business experience
  • Details of the services the seller will provide to the buyer
  • A current financial statement
  • Descriptions of the type and length of training provided by the seller

Any party wishing to offer a franchise for sale must produce this document and file it with the Secretary of State. Franchisors often retain a dedicated franchise business lawyer to ensure that this disclosure is complete, legally compliant, and filed correctly.

Completing the Contractual Obligations for Selling Franchise Opportunities

While a franchise disclosure document contains vital information required under State law, it is not the final franchise agreement. A franchise agreement is a contract in which the franchisor offers services to the franchisee. In exchange, the franchisee provides an upfront payment and often agrees to pay a portion of profits over the length of the contract.

The exchange of payment for the right to use intellectual property and a business model or products are the core principles of franchise agreements. Franchise agreements should also contain clauses concerning other key provisions including:

  • Intellectual property concerns involving the use of trademarks, patents, or even business plans
  • A specific business plan that involves staffing, the acquisition of real estate, or production quotas
  • A detailed training program that teaches a franchisee how to use or market a product

As contracts, these franchise agreements carry the full force of law. Either party may ask a civil court to intervene in case of a dispute. Consequently, it is essential that a franchise agreement accurately reflect the wishes and goals of the franchisor. Franchisors should also be prepared to follow all relevant State and Federal regulations concerning their business.

Working with a Business Attorney Can Help You to Start Your North Carolina Franchise

Making the decision to offer your business plan, product, and intellectual property as a franchise is never one that you should make lightly. It is required that you follow all the proper steps and procedures to grow your business through franchising. A franchise business attorney could help you through every step involved in starting your North Carolina franchise. Contact an experienced franchise lawyer today to schedule a consultation and take your business to the next level.

Franchise.Law Entrepreneur Scholarship

Attorneys at Franchise.Law support entrepreneurs because they are entrepreneurs. For this reason, Franchise.Law is excited to announce the Entrepreneur Scholarship, designed to give students an opportunity to explore potential business ideas. Find out if you’re eligible for this $1000 scholarship award by visiting our scholarship page.

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