Franchising your business can create a significant revenue stream. However, offering a franchise opportunity to another party creates a lot of legal obligations for a franchisor. From the initial offer of a franchise to fulfilling the terms of a franchise agreement, operating as a franchisor can be complex.
Even if you already operate as a franchisor, it is necessary to audit your business practices and franchise documents regularly. The franchise laws change every few years, and case law constantly alters the interpretation of these laws. Auditing a franchise involves reviewing your franchise documents, franchise sales practices, franchisee support operations, and marketing material among other things.
A North Carolina franchise auditing lawyer could help you evaluate your business practices as a franchisor. If they discover that any changes must be made, your attorney could also help develop a strategy to make changes while minimizing interference with your business.
It may be good for business to allow others to use your products or structure to operate their own branches of your business. A franchising model offers many business owners a new revenue stream with potentially less effort than traditional expansion.
However, it is always necessary to evaluate one’s own business and intellectual property to determine if offering franchise opportunities is wise. A North Carolina attorney could help guide a potential franchisor through the franchise auditing process and determine the feasibility of franchising the business.
The North Carolina Secretary of State requires every potential franchisor to register their business opportunity with the State. According to North Carolina General Statutes §66-95, this registration process requires a franchisor to provide information about their business, an outline of the franchise opportunity, and a disclaimer that the opportunity is not guaranteed by the State. Franchisors must submit this franchise disclosure document to the State for approval.
Additionally, franchisors have the legal requirement to fulfill their ends of the bargain just as franchisees do, and a failure to provide the required equipment, training, or intellectual property could constitute a breach of contract. A franchise auditing attorney in North Carolina could help ensure a franchisor’s operation meets legal requirements. This helps protect a franchisor’s rights in the event of a breach of contract lawsuit.
When considering whether or not to offer franchises, it is generally a best practice to audit your franchise first and ensure that offering franchises is feasible or financially advisable. Furthermore, legal obligations do not end after the sale of a franchise. Most franchise agreements require ongoing commitments from franchisors, and a failure to meet these obligations could be considered a breach of contract, so reevaluation is often wise even after the franchise agreement is in place.
A North Carolina franchise auditing lawyer could help you take the steps needed to establish or preserve a franchise opportunity. Contact our attornies today to see how they might work with you to maintain solid business and legal practices as a franchisor.
By: Robert S.
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