The COVID-19 pandemic has changed the way people buy products and services. People are shopping from home more now than ever before, and some market experts are forecasting that this will not change even once we have a vaccine that allows us to resume life as we knew it prior to 2020.
With this in mind, is now the time to buy a mobile franchise?
With more people relying on products and services to be delivered at their doorstep – not just now, but possibly for the foreseeable future as well – it may seem like an opportune time to invest in a mobile franchise. If you think this seems like a good business opportunity for you, here are some legal issues you will want to consider as you move forward:
5 Legal Factors to Consider Before Investing in a Mobile Franchise
1. Buying a Franchise is a Long-Term Investment
Most franchise agreements have an initial term somewhere in the range of two to five years. Will the demand for mobile services truly be the same as it is today five years from now?
2. It Will Take Time to Recoup Your Initial Investment
In addition to your initial franchise fee, buying a mobile franchise will most likely mean investing in a vehicle; and, depending on the nature of the franchise, you could potentially be looking at tens of thousands of dollars in additional initial investment as well. Will you be able to generate enough revenue from your mobile franchise to recoup your investment—while paying your royalty and advertising fund fees and drawing a reasonable salary?
3. You Will Need to Pay Your Royalty and Advertising Fund Fees Before You Pay Yourself
When you own a franchise, you have to pay your royalty and advertising fund fees—no matter what. If you cannot afford to pay your franchisor and pay yourself, then you will need to rely on your reserves to cover your personal expenses. Are you confident in your ability to succeed, and do you have sufficient capital reserves in case you do not?
4. You Will Need to Adhere to the Franchisor’s Brand Standards
As a franchisee, you own your own business. However, buying a franchise is almost entirely unlike starting an independent business from scratch. In addition to the financial requirements we just discussed, you will need to adhere to the franchisor’s brand standards as well—even if you believe they are limiting your profitability. Are you prepared to remain compliant throughout the term of your franchise agreement?
5. If Your Franchise is Not Successful, You Will Not Have an Easy Way Out
Finally, while your franchisor will have various grounds to terminate your franchise agreement, you will not. If your franchise is not as profitable as you would like it to be, you will still need to continue operating in order to avoid the possibility of being held liable for “lost future royalties.” Is this a risk that you are willing to assume?
Discuss Your Mobile Franchise Opportunity with National Franchisee Attorney Jeffrey M. Goldstein
If you are prepared to move forward with investing in a mobile franchise, your next step is to discuss the opportunity with a franchisee attorney. At the Goldstein Law Firm, we offer four tiers of fixed-fee franchise business review programs for prospective franchisees. To discuss your options with attorney Jeffrey M. Goldstein in confidence, call us at 202-293-3947 or inquire online today.
