THINGS YOU NEED TO CONSIDER
Before signing a franchise agreement
1. Length of the agreement.
a. What is the duration of the franchise agreement?
b. How many times can it be renewed?
c. Who has the option to renew?
2. Fees and Expenses.
a. What are the levels of the initial fee, continuing payments (including advertising contribution) and any other contribution payable by the franchisee?
b. How are they calculated and how frequently are they paid?
3. Termination by Franchisor.
a. What are the “non-curable” grounds for immediate termination of the agreement?
b. What are the other, “curable” grounds for termination?
4. Termination by Franchisee.
a. Can I terminate the agreement early?
b. Will I owe damages for early termination?
5. Transfer.
a. Do I have the right to sell the business?
b. Does franchisor have right of first refusal?
c. What if I become incapacitated or die? Will the agreement be terminated? Will the franchisor appoint new management? Will my family have the option of continuing in the business or selling the business?
6. Disputes.
a. Do I have a right to a jury trial?
b. Will I have to travel to a distant state?
c. Are there any caps or limits on the type of amount of damages that either side may recover?
d. Is there a prevailing party clause (where the loser pays the winner’s attorney fees)?
Buying a franchise can be an expensive, long term proposition. Before investing tens or hundreds of thousands of dollars in a franchised business, it is important that you understand your rights and obligations. If you would like legal assistance consider contacting Randy Edwards at Cochran & Edwards, LLC, www.cochranedwardslaw.com or info@cochranedwardslaw.com.
