Despite the legal and financial risks involved, buying a franchise can be a profitable investment. With thorough research and planning, consistent effort, and some good luck, it is certainly possible to succeed as a franchisee. While we typically focus on the risks involved with franchise ownership on our blog (we are franchise lawyers, after all), the potential benefits of owning a franchise deserve acknowledgement as well. Under the right circumstances, here are seven potential benefits of franchise ownership: 1. Recognizable Brand Gaining access to a recognizable brand is one of the primary reasons why people choose to buy a franchise instead of starting an independent business. Opening your business under a name that is already well-known and respected can jumpstart your path to profitability. 2. Tested Business System Buying a franchise can afford access to a business system that has been tested and proven not just by the franchisor, but potentially by hundreds or thousands of franchisees across the country and around the world. Instead of spending the time (and money) to figure out what works and what doesn’t, you can feel confident knowing that the franchisor has already done this for you. 3. Franchisor Support A franchisor is only as successful as its franchisees. As a result, franchisors have a vested interest in providing their franchisees with as much support as possible. From launching your grand opening advertising campaign to overcoming unexpected hurdles months or years down the line, a good franchisor will be there for you when you […]

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Earlier this year, Entrepreneur.com published a slideshow titled, “5 Affordable Franchises You Can Start for Less Than $10,000.” So, can you really buy a franchise for four figures? If so, is it a good idea? How Much Does It Really Cost to Buy a Franchise? It appears that the article’s figures are based on the franchisors’ initial investment estimates in Item 7 of the Franchise Disclosure Document (FDD). For example, the first slide shows an initial investment of $3,245 to $21,850 for the Dream Vacations franchise. So, right away, you can see that while it may be possible to start a franchise for less than $10,000, it is also possible to spend twice that amount, if not more. As we often tell prospective franchisees, when reviewing the estimates in Item 7, it is generally best to assume that you will not be at the bottom of the estimated range. The second slide shows an even greater range of potential startup costs. For the Buildingstars commercial cleaning franchise, Entrenrepeur.com quotes the estimated initial investment at $2,245 to $53,200. In fact, among the five franchises you can start “for less than $10,000,” the lowest high-end initial investment is $17,000. Even so, $17,000 is still a fairly modest investment for purchasing a franchise (on the high end, the initial investments for hotel and restaurant franchises can easily range into the millions of dollars). So, is buying a “cheap” franchise a good idea, or are there hidden risks involved? Considerations for Buying a “Cheap” […]

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When buying a franchise, it is important to gather as much information as possible. While this primarily means gathering information about your chosen franchise opportunity, gathering information about competing franchise opportunities can prove valuable as well. But, most franchisors will only give copies of their Franchise Disclosure Documents (FDDs) and franchise agreements to serious candidates, and you cannot necessarily rely on details posted by third-party sites online (the information on these sites is often outdated). So, how can you compare franchise opportunities? 5 Sources of Information for Comparing Franchise Opportunities 1. Franchise Trade Shows and Expos Franchise trade shows and expos provide opportunities for prospective franchisees to meet with franchisors’ representatives face-to-face in a relatively low-pressure environment. There are plenty of these events across the United States each year, with the International Franchise Expo easily being the largest and most well-known. If you are serious about buying a franchise, visiting a trade show or expo may be worth your time, as you will be able to learn more about a multitude of different franchise opportunities. 2. Franchisors’ Websites While franchisors need to be careful about disclosing too much information on their websites, you can often find basic data about initial franchise fees, royalties, and system standards online. In many cases, this information will be presented in a table comparing the franchisor to its competitors. Of course, some franchisors’ websites are better than others, and any comparison tables you find are likely to be heavily skewed in favor of the franchisor […]

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Jeffrey M. Goldstein, founder of the Goldstein Law Firm, has been practicing franchise law for more than 30 years. Exclusively representing franchisees and dealers, he has successfully represented clients across the country in franchise agreement negotiations, arbitration, litigation and other franchise-related legal matters. Here, he sits down for a Q&A session to discuss some of the biggest legal risks facing new and existing franchisees: Q: What are some of the most-important legal factors to consider when buying or operating a franchise? In addition to facing the same legal risks as all business owners, franchisees face a number of additional risks as well. These risks relate predominantly to the rights granted to the franchisor under the franchise agreement. From operating standards to franchise transfer and renewal, franchisors have a say in virtually all aspects of franchisees’ businesses, and they will not hesitate to intervene (or even terminate a franchisee) when they believe that doing so is in the best interests of the franchise system as a whole. Q: How can prospective franchisees protect themselves before signing a franchise agreement? As a prospective franchisee, there are two primary ways to protect yourself before you sign a franchise agreement: (i) conducting thorough due diligence, and (ii) negotiating the terms of your franchise. By gathering as much information as you can from as many sources as possible, you can gain confidence in your decision to move forward (or to pursue a different path). Once you decide to pursue a particular franchise opportunity, then negotiating […]

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Whether you love cars or you are looking for a recession-resistant franchise with the potential for repeat business and a high sales volume, buying an automotive franchise presents both opportunities and risks. From seeing your customers every 3,000 miles to facing lawsuits when your customers’ cars break down and cause accidents, there are numerous factors that can increase both profit potential and liability exposure for automotive franchise owners. Here are four important legal considerations for purchasing an automotive franchise: 1. Liability for Employees’ Mistakes For automotive service franchises, such as oil change centers and repair shops, hiring well-trained and highly-skilled employees is of critical importance. When it comes to working on cars, trucks and SUVs, even minor mistakes can have drastic consequences. If one of your employees under-torques a drain plug or fails to properly bleed a customer’s brakes and the customer gets injured (or injures someone else) in an accident as a result, then your franchise could be in the line of fire. In addition to thoroughly vetting service employees, purchasing adequate insurance coverage can be critical to protecting an automotive franchise from business-threatening liability. Insurance policies should be crafted to meet the unique needs of the franchise, including both coverage limits and covered perils. 2. “Chain of Distribution” for Mandatory Products and Suppliers As a retail business, your automotive franchise will be in the “chain of distribution” for purposes of the law of product liability. This means that, if you sell a defective product that ends up causing […]

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