Thursday, January 14, 2010

Things To Do Before Signing That Franchise Agreement

Even if the economy continues its limpid trends though this year, someone ssomehwere will be looking at a franchise opportunity. Franchising offers wonderful opportunites to both the franchisor and franchisee. Unfortunately, franchises also offer achance for a fleeching by the unscrupulous and the criminal minded. Business Opportunities Weblog's

Franchise Contract Time Bombs does a fine job of setting out what can wrong.
* Do the numbers smell a little fishy to you? It is almost unheard of to have a franchise contract that supplies a full income statement. Watch out for exceptionally high and “pretty” looking expected income numbers.

* Take a look at what they want you to pay up front. Some franchisors make money right off the bat with a one time franchise fee. However, if the contract seems to show that you have a lot of costs up front then you should run in the opposite direction. This may mean trouble for you later when your having a tough time and they have already made their money off of you earlier on, recently stated on

* Make sure your royalty payments are not going to cost you an arm and a leg. Not all franchises charge these but if they do they shouldn’t break the bank to the point where it’s impossible for you to turn a profit.

* How Easy Is It To Get Out Of Your Contract? Franchise agreements can last for 10 years, and many franchisers make it difficult for franchisees to cut and run. Breach the contract and you’ll pay “liquidation damages.” Every UFOC contains (or should contain) a section devoted to rules governing termination, renewal and transfer of contracts. Read it–closely.
I have my own bit of advice: take the francise offering circular and the agreement to a lawyer before you pay a penny.

If you need a lawyer to review a franchise agreement, please contact me for an appointment.