Women in Franchising: Notable Statistics on Female Franchisees

Sep 29, 2017 - Blog by |

Earlier this year, Franchise Times reported the results of a study conducted by Franchise Business Review which examined the rising trend of female franchise ownership. The article highlights some interesting statistics, and it shows just how big of a role female franchisees play in current success and the projected future growth of the franchise industry. Here are some of the most noteworthy numbers from the survey: 63,000 According to Franchise Times, female franchisees earn an average income of $63,000 per year. 6,400 Franchise Business Review surveyed 6,400 female franchisees, representing only a portion of the female franchise owners operating today. 85 85 percent of female franchisees said they would recommend their brands to others considering franchise opportunities. 84 84 percent of female franchisees said that they respected their franchisors; however, only 80 percent said that they believed their franchisors acted “with a high level of integrity.” 74 According to Franchise Business Review, 74 percent of female franchisees say they would “do it again” knowing what they now know as a result of their experience in the franchise industry. 60 Sixty percent of female franchisees surveyed had a bachelor’s degree or higher. Seventeen percent held an associate’s degree, and 20 percent reported having only a high school education. 58 Just over half of female franchisees reported that their franchised businesses are meeting their financial expectations. 51 Child services is the only franchise sector in which the majority of franchise owners (51 percent) are women. Travel and hospitality has an even split […]

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When is the Right Time to Sue Your Franchisor?

Sep 27, 2017 - Blog by |

When you purchased your franchise, you never expected to in up in court. You did your due diligence, you read the statistics saying that most franchisees were satisfied with their businesses, and you were confident that you could make your franchised outlet a success. If your franchise is struggling, you are not alone. Building a successful business is not easy, and many franchisees find out that their relationships with their franchisors ultimately do more harm than good. As a result, they end up looking for a way out before their franchise agreement expires, and this often means exploring their options for litigation. Franchise Dissatisfaction: When Should Franchisees Take Legal Action? Of course, even under the most contentious of circumstances, full-blown courtroom litigation is generally a means of last resort. There are more-amicable alternatives available, and these will often offer more cost-effective and mutually-beneficial opportunities for resolution. That said, the issues that spur alternative dispute resolution (ADR) methods and litigation are generally the same, and dissatisfied franchisees should take the time to gain a clear understanding of all of the options that are on the table. If you are facing a dispute with your franchisor or seeking a way to terminate your franchise, the following are some examples of some potential grounds for legal action: State and federal disclosure violations, including inaccurate or incomplete information in a Franchise Disclosure Document (FDD) Imposition of illegal price-fixing arrangements and other illegal competitive restrictions Improper refusal to renew or consent to transfer of a […]

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Thinking about Buying an Existing Franchise? Here are Four Considerations to Keep in Mind

Sep 22, 2017 - Blog by |

When buying an existing franchised business, the process can involve a number of franchise and non-franchise legal issues. Here is an overview of some of the key issues to consider when evaluating a potential purchase of an existing franchise: Transfer Conditions Franchisors like control. One of the ways they exercise this control (among many, many others) is by placing conditions on franchisees’ ability to transfer their franchise rights. When communicating with your prospective seller, it will be important to gain a clear understanding of where he or she is in the process of obtaining approval for the transfer. As a prospective buyer, you will likely need to go through the franchisor’s approval process for new franchisees as well, and you should make sure you understand the requirements and timelines involved. Remaining Term and Renewal Rights All franchise agreements are time-limited. The length of time a franchisee is granted the right to operate is known as the franchise “term.” Before buying an existing franchise, you should make sure you know the amount of time remaining in the term, and you should factor this into your financial calculations. Likewise, most franchise agreements include “rights” to renew. If the seller’s franchise agreement includes a renewal provision (or if the seller is currently operating in a renewal term), you will want to make sure you have a clear understanding of your rights and obligations with regard to renewal. However, as we discuss below, you will also need to understand whether you will be required […]

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Should You Join (or Form) a Franchisee Association?

Sep 20, 2017 - Blog by |

As a franchisee, it is easy to feel like you are alone on an island. When you run into issues (and particularly issues with your franchisor), knowing where to go for help can be a challenge. In some franchise systems, one option may be to join a franchisee association. While these associations were once vehemently opposed by franchisors who feared the collective ranks of their franchisees (as is still the case in some troubled franchise systems), today, many franchisors acknowledge franchisee associations, and in some cases they may even turn to these associations for information and guidance. As a result, under the right circumstances, joining a franchisee association can have benefits on numerous levels, and it may make sense for both new and more-experienced franchisees to get involved. Three Questions to Ask When Considering a Franchisee Association But, as with most things in the world of franchising, there are two sides to association involvement. So, should you join (or form) a franchisee association? Here are some initial questions to consider: Q: What type of association are you considering? There are different types of franchisee associations. There are general associations (which are most common in large franchise systems) that represent the collective interests of their members, and then there are special-purpose associations that organize in response to a particular issue with a franchisor. Since there are only limited protections for franchisee associations under state law (and no specific protections under federal law), franchisees who are considering association membership must be aware […]

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Good or Bad? A Closer Look at Some Franchise System “Benefits”

Sep 15, 2017 - Blog by |

When considering franchise opportunities, it is important to understand that you are involved in a sales process. If you are a strong candidate, franchisors will want to sell you on their systems, and you will work with salespeople who get paid on commission to entice prospective franchisees to enter into franchise agreements. During this process, you will likely hear about several “benefits” that each franchise system has to offer. But, in many cases, these benefits can actually be limitations and restrictions in disguise. Let’s take a look at some examples: Benefit or Drawback: Common Selling Points for Franchise Opportunities 1. Designated Suppliers In product-based franchises and franchises that offer a mix of products and services (such as fitness gyms and cleaning franchises), it is common for franchisors to require their franchisees to make purchases from designated suppliers. There are a number of ways that this can be promoted as a benefit, from maintaining uniformity among franchisees to limiting your sourcing burdens and ensuring the quality of the products that go on your shelves. However, designated (or mandatory) supplier provisions come with drawbacks as well. For example, suppose your franchisor’s designated supplier falls behind on deliveries. Or, what if its products simply do not meet your (and your customers’) expectations? If you are contractually bound and unable to consider alternatives, these could present real problems for your franchised business. 2. Advertising Funds A system-wide advertising fund can provide significant benefits for the right franchisees in the right franchise systems. But, before […]

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Questions to Ask Your Franchise Attorney

Sep 13, 2017 - Blog by |

Whether you are considering a franchise opportunity, preparing to renew or transfer your franchise, or facing a potential dispute with your franchisor, it is important to have experienced legal representation. Not only are the legal issues involved complex, but franchisors often hire attorneys from big law firms to draft their agreements and deal with their franchisees. As a result, franchisees need an attorney who can level the playing field. When choosing an attorney to review your franchise agreement or protect your interests in negotiations, arbitration or litigation, you need to make an informed decision. The stakes are high, and you cannot afford to choose your attorney simply because he or she buys ad space on the Internet and claims to practice franchise law. Before you commit to hiring an attorney to handle your franchise-related legal needs, here are some questions you should seek to have answered: 5 Questions to Ask Before Hiring a Franchise Attorney 1. How long have you practiced franchise law? Generally speaking, the more experience an attorney has, the better. The most-experienced franchise attorneys have decades of experience in their chosen field. 2. Do you exclusively practice franchise law? Franchise law is a unique field with specific laws that apply at the state and federal levels. The state of the law – and the state of the franchise industry itself – are constantly changing, and an attorney who devotes his or her entire practice to franchising is likely to have a much better understanding of the legal […]

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Why Prospective Franchisees Need to Read (and Keep) the FDD

Aug 31, 2017 - Blog by |

The Franchise Disclosure Document (FDD) is a legal document that franchisors are legally-required to provide to new franchisees at least 14 calendar days (or longer in some states) before they sign a franchise agreement. While scouring the pages of an FDD can seem like a daunting task, state and federal laws require franchisors to provide prospective franchisees with these documents for a reason, and anyone considering a potential franchise opportunity should be sure to carefully review all 23 “Items” of the franchisor’s FDD. Still not sure that you want to try to conquer the FDD? Here are 10 reasons why it will be worth your time: 10 Reasons to Read Your Franchisor’s FDD 1. You Can Learn about the Franchisor’s History and Key Personnel How long has the franchisor been franchising? What experience do its executives and key personnel have both (i) in the business being franchised, and (ii) in the franchise industry? You can find these answers in Items 1 and 2 of the FDD. 2. You Can Find Out if the Franchisor Has Been Sued Is the franchisor in litigation with any of its franchisees? Is it facing a lawsuit that could lead to insolvency? Items 3 and 4 of the FDD include important information about litigation and the franchisor’s bankruptcy history (if any). 3. You Can Find Out How Much You Have to Pay Items 5 and 6 of the FDD disclose the fees you will need to pay to the franchisor (including the initial franchise fee, […]

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What Makes a Good Franchisor?

Aug 29, 2017 - Blog by |

What makes a good franchisor? It is a simple question, but most people have different answers. Do you value strong operational support? Or, do you prefer to operate under an established brand but to otherwise be left alone? Do you want your franchisor’s executives to be franchise-industry veterans? Or, are you looking for an innovative opportunity that has gained traction by breaking the mold (within the confines of the highly-regulated franchise industry)? If you are considering a first-time franchise opportunity, it is understandable that you are looking for guidance on the factors to consider when evaluating prospective franchisors. Here are some tips that may help you in making an informed decision: 5 Tips for Evaluating Prospective Franchisors 1. Assess the Owners’ and Executives’ Experience When you are relying on a franchisor for success, the people behind the company matter. Some franchisors are owned and run by individuals who were successful in building a brand and business model, but who lack any prior knowledge or experience in franchising. Then, there are the franchisors that hire industry veterans who have previously built and sold large franchise systems. One option is not necessarily better than the other, and you need to decide what you value most in the leadership of your franchise organization. You can find information about the franchisor’s owners, executives, directors and managers in Item 2 of the Franchise Disclosure Document (FDD). 2. Consider the Number of Years the Franchisor Has Been Franchising The age of the franchise system may be […]

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The Four Kinds of Franchise Lawyers (and Which One is Right for You)

Aug 24, 2017 - Blog by |

Whether you are considering a franchise opportunity or you are facing potential arbitration or litigation with your franchisor, you need experienced legal representation. The franchise relationship is rife with legal implications, and overlooking issues or making uninformed decisions can have potentially-drastic consequences for unexpecting franchisees. But, just like franchise opportunities, not all franchise lawyers are alike. So, how do you choose the right type of franchise lawyer to meet your needs? Relevant experience should certainly be among the driving factors, and you can learn a lot about a franchise lawyer by the scope and focus of his or her practice. What are the Four Kinds of Franchise Lawyers? 1. Lawyers that Handle Franchise and Non-Franchise Matters The first type of franchise lawyer is one who handles franchise-related legal issues as part of a broader practice. For example, many lawyers represent clients facing a wide range of business-related issues, including those specific to franchising. While this type of practice can be good for clients who need general business advice or who face a wide range of legal issues on a daily basis, due to the complexities of franchising, franchisees will often be able to obtain more nuanced and in-depth advice from a franchise-specific attorney. 2. Lawyers that Represent Franchisees and Franchisors The majority of true franchise lawyers represent both franchisees and franchisors. The reason for this is often financial: While there are far more franchisees than franchisors, franchisors have “deep pockets” and the need for ongoing legal representation. As a result, […]

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5 Legal Resources for Prospective Franchise Buyers

Aug 22, 2017 - Blog by |

If you are considering a venture into the world of franchising, there is a lot you need to know. From practical considerations (i.e. Do you have the drive to grow a successful business?) to financial ones (i.e. How much can you reasonably expect to make as a franchisee, and is it enough?), buying a franchise is not a decision to be made lightly. Then, there are the legal aspects. A franchise is a legal relationship governed by a complex (and franchisor-friendly) franchise agreement and a variety of general, franchise and industry-specific laws. To protect their financial interests and ensure that they have as many rights as possible, it is imperative that prospective franchisees give due consideration to the relevant legal issues during the franchise buying process. These resources provide an introduction to many of the legal issues that are important to franchisees: 1. Why Buy a Franchise? Have you asked yourself, “Why do I want to buy a franchise?” It is an important question, and one that gets overlooked with surprising frequency. Often, potential buyers get hooked on the idea of hitting the ground running while still running their own businesses, or they get sold on a particular franchise opportunity without stopping to truly consider the long-term implications. Buying a franchise can certainly have benefits, but these benefits come with risks as well. We examine both sides of the issue in: Why Buy a Franchise? 2. Big or Small (and Does It Matter)? Are you considering a national brand, or […]

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