FRANCHISE - Laws and Lawyers
A franchise agreement arises when a large business (franchisor), creates a contract with a smaller business (franchisee), which allows the franchisee to open and operate a chain store following the franchisor's operational rules and business model. The franchisee is usually given control of the direct operation of the chain store and earns a portion of the store profits. Franchise law governs these franchise agreements and regulates disputes between two such parties. Both parties should consult an experienced franchise attorney prior to signing an agreement or in the case of a dispute.
In the United States, franchise law is generally derived from the Federal Trade Commission (FTC). The FTC requires that any franchise agreement and disclosure document be delivered to the franchisee two weeks before any exchange of money in order for the franchisee to fully understand what the deal they are signing entails and what is required of them. In addition, a handful of states have passed franchise laws that have added specific franchisor requirements in addition to the federal laws. A franchise attorney should be consulted prior to signing any agreement.
Potential franchisees will be faced with a number of rules, regulations, and operating codes that they must follow when agreeing to manage a franchisor's storefront. The franchise agreement and other documents can become complex, but are important to understand as they govern the relationship. Franchise attorneys are a valuable resource in understanding the legal requirements of franchisors and franchisees. Starting a franchise is often an expensive process that can be a great risk to a potential franchisee, and should not be conducted without the assistance of a franchise attorney.