You own a franchise, and you are ready for more. You’ve gotten comfortable operating within the franchise model, and you are now at a point where you can rely on your employees to manage the business’s day-to-day operations. So, you are thinking about opening franchise number two. What do you need to know? Here are five important business and legal considerations from franchisee attorney Jeffrey M. Goldstein:
1. Should You Buy A Second Outlet from Your Franchisor or Explore a New Brand?
One of the first questions you need to consider is whether you should buy a second outlet from your current franchisor or explore a new brand. Both options can offer benefits under different circumstances. While it might be a good idea to stick with what you know, this could also mean moving into a geographic area with which you are unfamiliar. On the other hand, a new concept could serve to complement your existing business (i.e. opening a smoothie franchise next to a gym), but this would also require you to evaluate franchise opportunities that are completely new to you.
2. What Does Your Current Franchise Agreement Say?
If it makes sense to explore a new brand, you will need to have a franchisee attorney review your franchise agreement to determine what options you have available. In particular, you will need an attorney to review your franchise agreement’s non-competition clause. What constitutes a “competing” business? In many cases, this definition proves to be much broader than franchisees expect.
3. What Are the Terms of the New Franchise Agreement?
Regardless of the specific franchise opportunity you choose to pursue, you will need to carefully review the terms of the franchise agreement. If you will be purchasing a second outlet from your current franchisor, you will need to determine how its franchise agreement has changed over the years. If you will be buying a franchise from a different franchisor, you will need to ensure that you have a comprehensive understanding of the terms that will govern your new franchise.
4. How Will You Finance Your Second Franchise?
Financing is an important consideration when buying a second franchise as well. You may or may not have the same options available, and you will need to do everything you can to make sure that one franchise’s poor performance (should this ever become an issue) does not jeopardize the other.
5. Will You Be Looking to Expand Even Further in the Future?
Finally, if you think you may be interested in expanding even further in the future, this may be something you want to take into consideration now. Many franchisors offer area development and multi-unit development opportunities, and these present their own unique sets of benefits and risks as well.
Discuss Your Second Franchise with Franchisee Attorney Jeffrey M. Goldstein
Are you thinking about buying a second franchise? If so, we encourage you to contact us to learn more. To speak with franchisee attorney Jeffrey M. Goldstein in confidence, please call 202-293-3947 or inquire about our fixed-fee franchise business review programs online today.
