Buying a home services franchise allows you to be your own boss; and, for many first-time franchisees, it means using your home as your “headquarters” and driving to job sites in your local area. For many franchise candidates, it offers the perfect blend of independence and day-to-day interaction. Many home services franchises also offer relatively low barriers to entry (i.e. a modest initial investment), and the time from signing a franchise agreement to opening for business can be relatively short.
But, like all franchise opportunities, home services franchises also come with a variety of risks. If you are thinking about getting into the business of remodeling, repairing, upgrading or protecting other people’s homes, here are some key legal considerations to keep in mind:
1. Liability and Auto Insurance
If you (or your employees, if any) will be going into other people’s homes and installing new materials, using cleaning solvents or pesticides, or making substantial modifications, the risk of something going wrong is something you need to consider. The best way to mitigate your risk of liability due to a personal injury or property damage claim (aside from conducting thorough due diligence) is to purchase adequate liability insurance.
Since you will be driving on a daily basis, you will want to make sure you have adequate insurance coverage as well. Your state’s mandatory minimum coverage requirements may not be enough if you cause a serious accident, and you will likely need to purchase commercial auto insurance rather than a standard personal auto insurance policy.
2. Training and Support
Does the franchisor provide a thorough training program so that you will be able to follow the system effectively from day one? Will the franchisor’s representatives be available to provide prompt support if you have a question or need help with any aspect of your business? Since you will be servicing customers in real time, and since your reputation will likely be critical to your franchise’s success, you need to feel as confident as you can that the franchisor will meet your expectations during the term of your franchise agreement.
3. Mandatory Products and Suppliers
If you will be required to use specific products or buy from designated suppliers during the term of your franchise, this can present certain risks as well. While franchisors often try to position their proprietary products and “preferred” suppliers as benefits to franchisees, the reality is that there are a number of potential drawbacks to mandatory product and supplier requirements.
4. Territory Rights and Restrictions
As a franchisee, will you have an exclusive territory? Or, could you face competition from other franchisees (or even the franchisor) in your local market? Are you restricted from advertising or servicing customers outside of your territory? Territory provisions are not always as clear as they initially seem, and failing to understand the limits on your territorial protections or your potential market could have grave consequences for your home services franchise.
Speak With National Franchise Lawyer Jeffrey M. Goldstein
If you are thinking about buying a home services franchise, it is important to make sure have a clear understanding of the terms of the Franchise Disclosure Document (FDD) and franchise agreement. To learn more about our flat-fee franchise business reviews for prospective franchisees, you can call 202-293-3947 or request a free initial consultation online today.