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What is a franchise?
A franchise is a franchisor’s trade name, products, list of suppliers, and methodology. The franchisee (buyer) licenses these from the franchisor when the franchisee purchases the franchise. Common industries that franchise are restaurants, fitness/health centers, day cares, salons, pet supplies, tax services, construction products, professional services, and retail outlets.
What is the uniform franchise offering circular (UFOC)?
The UFOC is a document required by the Federal Trade Commission because of prior abuse by franchisors who made unfounded promises to unwitting buyers of franchises. The UFOC is the main document the franchisee’s attorney should read. It has disclosures about the franchisor’s history, the details of the costs involved in the franchise, and the franchisee’s responsibilities during the franchise.
What is the average length of time of a franchise?
Ten to fifteen years.
What are the costs to start up the franchise business?
The initial franchise fees are generally $10,000.00-$100,000.00, but total startup costs can be $600,000. Startup costs could include a lease, build out, training costs, attorney fees, inventory, and equipment.
Does the franchisor sign the lease for the franchisee’s business?
Generally, no only the franchisee has liability for the lease.
Can the franchisee set its own price for the franchise products depending on its local demographics?
Generally, no.
Are there other lump sums payable after the franchise term has begun?
Generally, yes. For example, remodeling if a store is involved.
What happens if the franchisee dies?
Generally, the franchise agreement contains a right to buy the franchise back by the franchisor; therefore, the franchisee’s family or heirs do not inherit the franchise.
Can the franchisee sell or terminate the franchise?
Generally, no.
Can the franchisee compete against the franchisor when the franchise is over?
Generally, no, and this restriction can be a huge detriment to the franchisee who is skilled in that one industry.
