“Green” franchises became mainstream a handful of years ago, and their popularly has held steady ever since. From commercial cleaning and pressure washing franchises to franchises that install synthetic turf systems and home efficiency technologies, if you want to start a business that is eco-friendly, there is probably a franchise opportunity that will appeal to you.
But, as with all franchise opportunities, when purchasing a “green” franchise, it is important to perform your due diligence. This means talking to the franchisor, talking to current and former franchisees, and hiring a franchise lawyer to review the Franchise Disclosure Document (FDD) and franchise agreement. In addition to the legal concerns that apply to franchise opportunities generally, here are some “green”-specific considerations to keep in mind:
1. Substantiation of “Green” Advertising Claims
When “green” businesses started popping up with increasing frequency, so did references to the concept of “greenwashing.” This term refers to businesses spinning, misrepresenting, or selectively publishing information in order to make themselves appear “greener” than they really were. Significant cases of greenwashing can constitute false advertising, which is a form of consumer fraud
As a franchisee, you will likely use advertising materials that have been prepared by your franchisor. But, this does not necessarily mean that you are immune from liability for false advertising. Your franchisor should be able to readily substantiate its claims of environmental friendliness; and, if it can’t, your best option may be to consider a different franchise opportunity.
2. Mandatory Suppliers
For product-based franchises, the commitment to environmental friendliness often also means a commitment to use certain designated suppliers. So, how much can you find out about the companies that supply the products you will use or sell? Do they warrant their products’ “green” qualities; and, if so, does this warranty get passed through to franchisees? Are their prices consistent with those of their competitors?
3. Modification of Brand and System Standards
What if consumers become less environmentally-conscious during the term of your franchise agreement? What if new technologies make your products or services obsolete? What if your franchisor simply decides that focusing on “green” products or services is no longer the way to go? Franchisees often receive very little in terms of protection against brand and system modifications; yet, when franchisees believe that changes are necessary, they often have little (if any) flexibility to make them.
4. Market Demand
While environmental consciousness is absolutely a noble cause, it is also trendy, and many “green” products and services are more expensive than their more-harmful counterparts. If customers feel less social pressure to make environmentally-friendly decisions, or if economic conditions reduce the number of customers who can afford what your franchise sells, this could make it difficult to survive for the duration of your franchise agreement.
Contact Franchise Lawyer Jeffrey M. Goldstein
Jeffrey M. Goldstein is a highly-experienced franchise lawyer who has been representing prospective and active franchisees for more than 30 years. If you would like help evaluating your “green” franchise opportunity, you can call (202) 293-3947 or inquire online to learn about Mr. Goldstein’s flat-fee franchise business review services.