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Food franchises account for nearly a third of all franchised outlets in the United States. As a result, the health of the food franchise industry is crucial to the health of the franchise industry as a whole, and trends in food franchising often make their way into other sectors.

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The COVID-19 pandemic has had an unprecedented impact on our education system. With many students missing months of school in 2020, and with students across the country attending class remotely and relying on working parents for daily guidance in 2021, experts are forecasting long-term impacts for students of all ages. As reported by the Organization for Economic Co-operation and Development (OECD):

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While the start of the New Year was a symbolic refresh for many people, as 2021 is now in full swing, it is clear that things are still far from normal. Spikes in COVID-19 cases are once again triggering new shutdowns and restrictions around the country, and many business owners – franchisees in particular – are struggling as a result. If your franchise is at risk in 2021 due to the effects of the pandemic, what do you need to know? Here are some important insights from franchise lawyer Jeffrey M. Goldstein:

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Entrepreneur.com recently released its Franchise 500 list for 2021. The Franchise 500 is the online media platform’s annual ranking of the best franchises in the United States. If you are thinking about buying a franchise listed on the Entrepreneur.com 2021 Franchise 500, we encourage you to inquire about one of our fixed-fee franchise business review programs.

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Attending large franchise conventions and visiting the franchisor’s headquarters are two hallmarks of the franchise due diligence process. They are also two events that have largely been put on hold during the COVID-19 era. But, franchisors are still selling – and franchisees are still buying – and those who are thinking about buying a franchise must still perform thorough due diligence in order to make an informed buying decision.

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If the start of the New Year has you thinking about buying a franchise, there are several important factors you will want to consider as you evaluate different franchise opportunities and make your final decision about moving forward. While many of these factors have to do with the financial aspects of buying a franchise, you need to consider the pertinent legal issues as well, as failing to protect yourself legally could potentially put your franchise in jeopardy. Here, national franchise lawyer Jeffrey M. Goldstein discusses four important legal considerations for individuals who are thinking about buying a franchise in 2021: 1. How Have Other Franchisees Fared During the Pandemic? Even once the COVID-19 vaccine is available to everyone nationwide, things still won’t fully be back to normal for some time. As a result, while there is reason for optimism in 2021, as a prospective franchisee, it is still important to take cues from 2020. Within the brands you are considering, how have existing franchisees fared during the pandemic? Are they optimistic about the future? You can find franchisees’ contact information in the Franchise Disclosure Document (FDD), and you can – and should – speak with many franchisees during the due diligence process. 2. What Will Happen if Your Franchise Isn’t Successful? No one wants to think about the possibility of failure when buying a franchise. But, the reality is that addressing this contingency is one of the most important aspects of ensuring that you have reasonable legal protections before you […]

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The COVID-19 pandemic has forced the vast majority of Americans to spend more time at home, and it has had a hugely detrimental impact on the brick-and-mortar retail sector. Even with some light at the end of the tunnel heading into 2021, there are still many unknowns, and many experts are suggesting that consumers’ enhanced reliance on home services and home delivery will be an enduring trend. Given these considerations, buying a mobile franchise may seem like a good option. If you are thinking about buying a mobile franchise, what do you need to know? Here are some tips from national franchise attorney Jeffrey M. Goldstein: 1. Make Sure You Know What it Takes to Succeed Succeeding as a franchisee requires different skills and a different mindset than succeeding as an independent business owner. While you will need some of the same general business skills, you will also need to be able and willing to operate within the confines of the franchise system. While there are no true “keys” to success, there are steps you can take to improve your chances of building a profitable mobile franchise. 2. Make Sure You Know Why Franchises Fail In addition to knowing what it takes to succeed, it is also important to know why franchises fail. Building a successful franchise requires more than the ability to market and operate a successful business. Your success will be contingent upon your franchisor’s business practices as well; and, in many cases, franchisees fail because their franchisors […]

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Signing a franchise agreement signals the end of one process and the beginning of another. You have completed your evaluation of competing franchise opportunities and due diligence, and now you are officially a “franchisee.” So, what’s next? Here, franchise lawyer Jeffrey M. Goldstein explains what happens after you sign a franchise agreement: What Does It Mean to Sign a Franchise Agreement? A franchise agreement is a binding contract that establishes the franchisor’s and franchisee’s respective rights and obligations. Once you sign, there is no going back. You are committed to building and running your franchise, and you must now begin thinking in terms of what is and isn’t allowed under the terms of your agreement. You will soon be required to pay your initial franchise fee (if you haven’t paid it already), and this fee is almost certainly non-refundable under the terms of your franchise agreement. You probably only have a certain number of days or months to get your franchise up and running as well; and, even if you don’t open in time, you could still be liable for making monthly royalty and marketing fund payments. What Are Your Next Steps After Signing a Franchise Agreement? Once you sign a franchise agreement and pay the initial franchise fee, what are your next steps? Typically, you will be required to participate in some form of training, and you will need to execute a plan for meeting all of your franchise agreement’s other pre-opening requirements. You will need to find vendors, […]

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Owning a franchise comes with many obligations. If you fail to meet your obligations as a franchisee, this can have varying consequences depending upon the specific issue and circumstances involved. Many of these obligations and consequences arise out of “non” clauses in the franchise agreement. Here, franchise attorney Jeffrey M. Goldstein explains what prospective and active franchisees need to know: 1. Non-Encroachment If you buy a franchise with a protected or exclusive territory, you will need to respect other franchisees’ territorial rights as well. This obligation typically appears in the form of a “non-encroachment” provision in the franchise agreement. If you encroach on another franchisee’s territory, you could face consequences up to and including termination of your franchise. Conversely, if a franchisee (or the franchisor) encroaches on your territory, then you may be able to enforce your right to non-encroachment. 2. Non-Competition When your franchise agreement ends (whether through expiration or termination), you will almost certainly be subject to a “non-competition” covenant. These covenants can vary widely in terms of their substantive scope, geographic scope, and duration. However, non-competition covenants are generally enforceable (with some exceptions), and franchisors will often vigorously enforce former franchisees’ non-competition obligations. 3. Non-Solicitation Many franchise agreements contain “non-solicitation” clauses in addition to non-competition clauses. These clauses prevent former franchisees from contacting their customers for business-related purposes. As a franchisee, “your” customer list actually belongs to your franchisor; and, once your franchise ends, you are no longer able to use the list (even if you have […]

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If you are thinking about buying a franchise, you probably have a list of factors that you are using to build a list of the brands you want to consider. The initial investment, royalty rate, number of local franchisees—these are all important considerations when choosing the franchise opportunity that makes the most sense for you. But, when you hire a franchisee lawyer to review your Franchise Disclosure Document (FDD), what are some of the issues that he or she will consider “red flags”? 5 Examples of Legal Issues that Could Spell Trouble for Prospective Franchisees A franchisee lawyer reviews an FDD from a very different perspective than a prospective franchisee. For example, here are five potential “red flags” from a franchisee lawyer’s point of view: 1. A History of Litigation (Especially Involving Franchisees) Most prospective franchisees skip over Item 3 of the FDD. However, from a franchisee lawyer’s perspective, the litigation disclosures in Item 3 can be extremely important. This is especially true if the franchisor has a history of litigating with its franchisees, although any significant amount of litigation could mean that the franchisors’ focus and resources will be shifted away from supporting franchisees and growing the franchised brand. 2. An Inexperienced Leadership Team Many franchise systems grow out of successful retail businesses. If your franchisor owned a successful business and then decided to franchise, lack of experience in franchising—as indicated in Item 2—could potentially present a concern. 3. Lack of a Registered Trademark One of the main reasons […]

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