While franchising used to be known for its litigious and somewhat risky nature, it’s become a normalized strategy of growth for many companies and a desirable business model for potential business owners. Common legal issues in the development of franchising as a model have mostly been ironed out with tightly worded contracts created by experienced franchise lawyers.
What potential legal risks do you still need to be wary of?
The main legal issues between franchisors and franchisees today are liability, violations of franchise law and fraud in the selling process.
Franchises are individually owned and operated, which makes the franchisee liable for any potential claims. In most cases, the franchisor bears no liability, but some business owners find ways to contest this state of affairs.
Franchisors can be liable for violations of franchise law and fraud during the selling process. This can happen as a result of inexperienced or inadequately trained sales representatives. It’s your responsibility as a potential business owner to do your due diligence at the start of your endeavor so that you know what you are signing up for. Get the legal counsel you need to confirm your findings.
Franchising is regulated
There are rules of conduct and mandatory disclosures. Franchisees need to be aware of the laws in place so that they can protect themselves and their business. To mitigate risks, work with an experienced franchise attorney to fully understand your contractual rights and responsibilities.