The International Franchise Association (IFA), the “world’s oldest and largest organization representing franchising worldwide,” recently announced a partnership with the National LGBT Chamber of Commerce (NGLCC). According to the IFA, the goal of the partnership is, “to further the organizations’ shared missions of creating business opportunities for all Americans and cultivating diversity and inclusion within the franchising industry . . . [and the] partnership is NGLCC’s first programmatic partnership with a trade association.” As a result of the partnership, the IFA will also be recognized as a Trade Association Sponsor by the National Business Inclusion Consortium (NBIC), which is a coalition of diverse business organizations including the NGLCC, the United States Black Chambers, Inc., Disability:IN (formerly USBLN), the United States Hispanic Chamber of Commerce, the United States Pan Asian American Chamber of Commerce, WEConnect International, and the Women’s Business Enterprise National Council. In a statement, NGLCC President Justin Nelson stated that the partnership will “bring [] LGBT franchise owners one step closer to having their voices heard and securing the LGBT business community an equitable seat at the table.” About the International Franchise Association (IFA) The IFA is perhaps the most well-known membership organization in the franchising industry. It works to promote the interests of the franchise industry through education, advocacy and government relations, and its members include franchisors, franchisees and suppliers. More information can be found at franchise.org. About the National LGBT Chamber of Commerce (NGLCC) The NGLCC is an advocacy organization that promotes diversity and inclusion for lesbian, […]

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If you love working with children and want to be your own boss, buying a child-related franchise may seem like the perfect fit. After all, who wouldn’t want to hit the ground running with a recognized brand and a business format that has proven effective at tens – if not hundreds – of locations around the country? While buying a franchise certainly can offer these benefits, not all franchise opportunities are created equal, and owning a franchise presents certain unique challenges as well. Providing child-related services also presents some unique risks; and, as a franchisee, you can expect to bear full responsibility if something goes wrong. If you are thinking about buying a child-related franchise, here are some of the key legal considerations you will want to keep in mind: 1. Liability (and Insurance) Working with children or providing services to children inherently presents liability risks that are not present for other types of businesses. Children cannot legally waive liability, so you will need to make sure their parents do so on their behalf. While your franchisor should provide a waiver form that contains the necessary language: (i) this language may or may not be enforceable in your state; and, (ii) it will be up to you to ensure that all parents sign before dropping their children off at the door. As a result, you should have the waiver form reviewed by an attorney, and you should be sure that you have a system in place for securing parent signatures […]

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Your franchise agreement is about to expire. You have reviewed the renewal conditions in your franchise agreement, and you are pretty sure that you have done everything that is required in order to extend your franchise for another term. So, why does your franchisor seem to be the only thing standing in the way? There are a few potential reasons why your franchisor may not want to renew your franchise agreement. Understanding these reasons will help you make informed decisions about your next steps forward. 3 Reasons Why Franchisors Try to Prevent Renewal Although individual circumstances can vary, there are three primary reasons why a franchisor may not want to grant a renewal term to a particular franchisee. These reasons are: To Grant the Territory to a More-Favored Franchisee – Whether you have struggled to consistently meet your royalty and advertising fee obligations, an existing (and more profitable franchisee) has expressed interest in your franchise, or a new prospect is interested in your territory and appears to be more attractive franchise owner, your franchisor may be trying to remove you from the system in order to make room for a more-favored franchisee. To Take Over Your Territory for Itself – If your territory has been particularly profitable, your franchisor may want to take over the territory for itself. It may be that your franchisor wants to let your franchise agreement expire so that it can open a new company-owned location. To Offer an Area Development Agreement to a Larger Franchisee […]

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When you buy a franchise, you expect value for your investment. You paid an initial franchise fee and you will be paying royalties and advertising fund fees for years to come, and you – rightfully – expect something in return. However, as a franchisee, the onus to succeed is ultimately on you. No matter what the franchisor’s sales representatives told you during the pre-buying process, and no matter what your preconceived notions of the franchise relationship may be, as a franchisee, you are responsible for your own success. While you should be able to count on your franchisor for basic system support and to grow the general recognition of the franchised brand, it is up to you to turn a profit as a franchise owner. 5 Key Considerations for Early-Stage Franchisees So, what does this mean from a practical perspective? While every franchise opportunity is unique and industry, geographic and other factors will greatly influence the profitability of any individual franchised business, some steps early-stage franchisees can expect to have to take on their own include: 1. Marketing the Business Prior to Opening Grand opening expenditures are (or should be) included in the Franchise Disclosure Document’s (FDD) Item 7 estimated initial investment disclosures, but even the high-end estimate will often fall far short of what franchisees need to spend. Social media and local grassroots marketing efforts may be necessary as well, and franchisees will often benefit greatly from building awareness while they work toward opening for business. 2. Developing and […]

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Whether you are an experienced franchise owner or you are thinking about leaving your full-time job to enter the world of franchising, buying a franchise in 2019 presents some unique legal and practical considerations. Before you sign a franchise agreement, here are five important factors to keep in mind: Factors to Consider Before Buying a Franchise 1. Franchise Openings, Closings and Projections Franchisors are required to update their Franchise Disclosure Documents (FDDs) annually to reflect new openings and closings and to provide updated projections for the coming year. How old are the data in the FDD you received? While historical figures can still be useful, more-recent trends will give you a better idea of the current state of the franchise system. 2. Industry Factors Speaking of trends, while some franchise concepts have staying power, others seek to capitalize on trends in consumer behavior. The hottest franchise in 2018 may not have much viability in 2019, and the concepts that are popular now may not be popular in 2020. 3. Online Competition Consumers are increasingly turning to the Internet for retail purchases, and new delivery services are making it faster and easier to get everything from food to clothing (that you can try on and send back) at home. Additionally, as we recently discussed, Amazon is offering a $15 per hour entry-level wage, and this may make it harder for franchisees to attract quality employees as well. 4. Franchise Agreement Terms From arbitration to indemnification, franchisors are constantly finding new ways […]

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According to Franchise Direct, the pet franchise industry is growing rapidly. With pet owners spending around $70 billion annually, buying into a pet-related franchise may seem like a smart investment. But, whether you are interested in opening a brick-and-mortar “pet hotel” or retail outlet, operating a mobile pet grooming franchise, or walking dogs in your local neighborhood, there are some important legal factors to consider, and rushing into a franchise opportunity could prove to be a costly mistake. Important Legal Considerations for Purchasing a Pet-Related Franchise Before you buy a pet-related franchise, here are some important legal considerations to keep in mind: 1. Liability to Clients If you will be providing training, walking, grooming, or hospitality services, what are your responsibilities while you have custody of your clients’ pets? What if an animal gets sick while in your care; or, what if one client’s pet attacks another’s? While your franchisor should provide guidance for addressing these types of issues, do not expect your franchisor to assume liability if your franchise gets sued. This is true even if an animal gets sick or injured to your use of franchisor-mandated products or supplies. 2. Liability to Others In a similar vein, what happens if a client’s pet attacks someone else? For example, what if a client’s dog escapes off-leash or you lose control of a dog during a walk, and the dog bites a passer-by? Once again, your franchisor is not going to assume responsibility; so, should you? Are you prepared to […]

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A recent article on FranchiseDirect.com seeks to answer the question, “How much does it cost to buy a franchise?” by comparing the startup costs for two very different franchise opportunities: a work-from-home travel agency and a 300-plus room high-end hotel. In doing so, it lists the Item 7 estimated initial investment disclosures from two Franchise Disclosure Documents (FDDs), which range from a low-end total of $3,245 to a top-end investment in excess of $64 million. While these may be franchisors’ actual published figures, they represent two different extremes. Most franchisees will need to initially invest amount that is somewhere in the middle, often somewhere roughly in the range of $50,000 to $100,000. Where to Find Information on Franchise Startup Costs When looking for information on franchise startup costs, Item 7 of the FDD is one place to look, but it should not be prospective franchisees’ only source of information. There are a number of reasons why. Most notably: Franchisors’ numbers in Item 7 are “estimates,” and they may or may not be based upon data gathered from franchised and company-owned openings. Startup costs can vary by geographic location. Real estate leases, licenses, permits and other necessities can all vary greatly in cost from one area to the next. The list of itemized expenses in Item 7 may or may not be complete. Franchisors may overlook or omit certain expenditures, or you may need to incur costs that are not common amongst other franchisees. Even franchisors’ high-end estimates will often be […]

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Although indemnification clauses are ubiquitous in the franchise industry, indemnification is a legal concept that few franchisees, franchisors and even franchise attorneys truly understand. This is unfortunate, because it leads many franchisees to assume legal responsibility for liabilities that are far beyond their control, and it prevents many franchisors from negotiating reasonable concessions that would be no-brainers if they understood the terms of their own franchise agreements. What is Indemnification? So, what is indemnification? In its most basic form, indemnification is the oblation for one party to assume liability for a claim against another party. So, if Joe sues Jane and John has an obligation to indemnify Jane, if Joe wins, John is the one who is ultimately responsible. In a typical franchise agreement, the indemnification clause will look something like this: “Franchisee will fully indemnify and hold harmless Franchisor from and against any and all claims arising out of or relating to the Franchise, whether asserted during the term of the Franchise Agreement or after the Franchise Agreement expires.” This sounds reasonable enough, right? If a customer sues your franchisor for something that you did, doesn’t it make sense for you to be held liable? While a duty to indemnify may make sense in this particular scenario (although, even this may not necessarily be the case), there are plenty of other scenarios where the franchisor should be the one to indemnify. Most Franchise Agreement Indemnification Clauses are Overly Broad While you will be the face of your franchise and, […]

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All franchise opportunities present certain legal issues. From your obligation to pay royalties to the franchisor’s right to terminate your franchise agreement, virtually all aspects of the franchise relationship have legal implications. In certain sectors, the nature of the business can give rise to legal concerns as well. Senior care is one of these sectors. What are Some Potential Legal Risks for Senior Care Franchise Owners? Whether you are considering an in-home care franchise, a medical staffing franchise, a franchise for a skilled nursing facility, or any other type of franchise focused on serving the elderly, it is important to have a clear understanding of the potential legal risks involved. Along with conducting your due diligence and negotiating your franchise agreement, this also means addressing the legal issues associated with: 1. Lease Negotiations If you will be leasing a senior care facility or administrative office space, it will be important to put as much effort into negotiating your lease as you put into negotiating your franchise agreement. Similar to franchise agreements, commercial lease agreements are often heavily one-sided; and, in addition to ensuring that you can use the space as you intend, you will also need to make sure that you have adequate protections so that you can remain in the space throughout the term of your franchise. 2. Hiring and Employment When hiring people who will be caring for seniors or who will have access to seniors’ places of residence, conducting adequate screening and background checks takes on heightened […]

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Each year, we publish numerous articles designed to help prospective and current franchisees gain insight into the franchise buying and ownership processes. 2018 was no exception. Here are 10 of our top articles from throughout the year: Top 10: Franchise News and Insights from 2018 1. Franchise Industry Statistics: Most-Popular Industries and Locations While buying a franchise requires a careful assessment of your personal skills, finances and interests, analyzing trends can also help you make an informed buying decision. We recently took a look at the most-popular franchise industries and the states with the most (and least) franchised businesses. 2. What Is the Universal Franchisee Bill of Rights? In this post for Blue MauMau, we provided our thoughts on the Universal Franchisee Bill of Rights and discussed some key takeaways for new and exiting franchisees. 3. FDDs, Franchise Agreements and Operations Manuals – What Do Prospective Franchisees Need to Know? There are three main legal documents that govern the franchise relationship: The Franchise Disclosure Document (FDD), the franchise agreement and the Operations Manual. In this article, we provide an introduction to each and discuss some of their key implications for franchisees. 4. What Does it Mean if My Franchise Agreement Requires “Mandatory Arbitration”? While arbitration is supposed to provide a level playing field, the reality is that “mandatory arbitration” clauses often heavily favor the franchisor. We explained why in this article from Summer 2018. 5. What Can You Really Hope to Negotiate in Your Franchise Agreement? When buying a franchise, […]

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