If your background is in finance, tax, marketing or business administration, owning a franchise may be compelling for a couple of different reasons. Not only could owning a franchise mean running and managing your own business, but it could also mean using your background and experience to help other individuals and businesses.
Depending upon exactly what you are looking for, there are a variety of different franchise opportunities available in the business and financial services sectors. Of course, all of these franchise opportunities present different risks, and choosing the best franchise for your individual circumstances requires thorough due diligence and a careful assessment of the Franchise Disclosure Document (FDD) and franchise agreement.
For prospective business and financial services franchisees, here are five special considerations to keep in mind:
1. Approved Products and Services
For many people, one of the appealing aspects of buying a franchise is having access to an approved (and presumably well-vetted) list of products and services. However, as a professional service provider, this may not necessarily fit your goals. Will you be comfortable limiting your product or service offerings based upon what the franchisor allows? Might you feel hamstrung by not being able to offer a full suite of services based upon your personal background and experience? These are issues that could significantly impact your level of satisfaction as a franchise owner.
2. Professional Liability (Errors and Omissions)
If you will be providing professional advice to individuals or businesses, you may need to factor premiums for professional liability (errors and omissions) insurance into the overall cost of franchise ownership. Regardless of how much direction your franchisor offers (or imposes), if something goes wrong, you are going to be the one held responsible.
3. Control Over Marketing and Business Operations
As a franchisee, you are entitled to take advantage of the franchisor’s marketing materials and business system. You are also required to use them, even if you would prefer otherwise. If you see opportunities for growth and your status as a franchisee holds you back, you are likely to have little recourse other than waiting out the expiration of your franchise term.
4. Post-Term Non-Competition Covenant
When your franchise relationship is over, you are likely to be subject to some form of non-competition covenant. As a professional, when negotiating your franchise agreement, it is critical to make sure that you preserve your ability to make use of your experience and education post-expiration or post-termination.
5. Territorial Restrictions
If you have an existing network of professional connections, agreeing to territorial restrictions could mean significantly limiting your potential profitability. Likewise, if your business clients grow and expand outside of your territory, the territory provisions of your franchise agreement could require you to refer your client’s new business to another franchisee.
Get Help Negotiating Your Franchise Agreement
Founded by 30-year franchise attorney Jeffrey M. Goldstein, the Goldstein Law Firm provides nationwide legal representation for prospective and existing franchisees. To learn more about our firm’s flat-fee franchise business review packages, please call 202-293-3947 or inquire online today.
