Monthly Archives: April 2023
While building a franchise system used to be a long-term endeavor, it is becoming increasingly common for companies to establish franchise systems in order to sell out and move on. We have seen several reports of franchisors selling relatively “young” systems in recent years; and while franchisor founders may say that their decisions are driven by doing what is best for their franchisees, the reality is that selling out offers both a substantial payday and the ability to avoid ongoing risk related to the operation and management of the franchise system.
Illinois is one of relatively few U.S. states that have adopted both a franchise disclosure law and a franchise relationship law. These laws provide statutory protections to prospective and current franchisees; and, when franchisors violate these laws, franchisees have certain rights even if these rights are not spelled out in their franchise agreements.
If you have been exploring franchise opportunities, you have likely discovered that all franchisors have a Franchise Disclosure Document (FDD) that looks fairly similar. But do you know why this is the case? It isn’t because franchisors want to make disclosures or simply copy their competitors, but rather because the FDD is required under a set of federal regulations commonly known as the “FTC Franchise Rule.”