Franchise Agreement: What You Need to Know Before Signing

Owning a franchise is an appealing option for those who are interested in leading their own success, having large amounts of control and supporting themselves with an adequate salary. Having said this, signing a franchise agreement should not be taken lightly. Franchise agreements are often complex to navigate. Before signing a contract it is absolutely critical that you have thoroughly read and understood what is being agreed upon and what the expectations moving forward will be.

Business Timeline

Signing a franchise agreement is usually a fairly lengthy process, often lasting as long as two months. This provides the necessary amount of time to thoroughly read through the franchise agreement, involve an attorney and work through any questions or concerns with the franchisor.

The team at Law Works can help you pay close attention to the timeline of the process to ensure that the franchisor is not rushing you. If you are feeling pressured or rushed to make a decision and sign the agreement, this could be a sign that there are issues in the contract that the franchisor is hoping you will overlook. That’s why it’s critical that you ensure you are comfortable with the timeline. Discussing and agreeing on an ideal timeline at the beginning of the process will help avoid being suddenly rushed into making a poor decision.

Do You Have The Right Information?

Do you have enough information? The main factor in your decision is the information you are provided with about the franchise, and what signing a franchise agreement will mean for your life. Ensure that you have received adequate information about the franchise business, payments, marketing, reporting, product supply, returns on investment and expectations moving ahead.

Common questions to ask yourself:

  • Do you understand the history of the business and its success in the past?
  • Are you aware of public opinion on the franchise?
  • Have you sought out assistance reading and understanding any legal documentation?
  • Have you met with a financial advisor to examine whether this is a feasible option for you?
  • Are you aware of the reasons the franchise is for sale?

It’s can be an overwhelming list of questions but if you answered “no” to any of them, then it’s very possible that you do not have enough information.

Signing a franchise agreement is a big step, and you are entitled to understand the answers to these questions thoroughly. It is wise to have a professional who frequently deals with franchise agreements and will assist you in the process so you do not overlook any important details. It’s better to have these important questions answered than to not have asked them at all. 

Franchise Negotiation

A leading motivation for purchasing a franchise is often to have the control to make the business your own and be your own boss. However, not all franchises offer the same amount of freedom to do this.

Large, highly established franchises frequently have very specific business models and systems in place which they’ve found to be very successful. These franchises require that new franchisees will continue to operate in the same way as the other chains to maintain uniformity. This can leave little room for negotiation.

While somewhat limiting, for many franchisees, this structure is desirable, as you can feel confident based on the previous proven success that the franchise you are purchasing will reliably produce a return on your investment.

Ultimately, when signing a franchise agreement it is important to do your research and seek professional legal guidance. However, do not doubt the role of your instincts. Signing a franchise is an exciting yet risky decision, so make sure you take into account these points of interest before signing.

For more information, contact the legal franchise business experts at Law Works.

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Law Works Vaughan: 3 Steps to Resolving Your Franchise Dispute

Find out how to get the most out of your mediation so you can reach a resolution quickly and easily!

If you’re struggling with problems or disagreements with your franchisor, it might seem like it’s impossible to reach a resolution, but don’t worry! Disputes are common, but if you can’t come to an agreement it’s best to appoint a mediator to help out.

The expert mediation at Law Works Vaughan will help you negotiate an outcome that is acceptable to both parties. In our hands, you can rest assured your dispute will be settled as quickly and as smoothly as possible.

Read on to find out how you can get the most out of your franchise dispute mediation:

Prepare and know what you want to achieve

Make sure you have a clear understanding of the problems and how you would like to solve them. Outline your case clearly and concisely at the start of the mediation and have all your paperwork ready to substantiate your claims. For example, if you are alleging your franchisor has violated your contract, be sure to have records to prove it.

Observe obligations

Although you may be dissatisfied with your franchisor, it’s important to uphold any obligations under your franchise contract. Some examples of this might include adhering to confidentiality agreements and ensuring goods or services provided during the dispute are up to standard. It’s easier to make your case if you hold up your end of the deal.

Be cooperative

Try to resolve the dispute and understand that both parties must compromise in order to reach a resolution. Sometimes it’s necessary to think of creative or alternative ways to settle the dispute such as a cash settlement. Whatever the agreement, it’s important to get it in writing to prevent further disagreements.

 

3 Reasons Why You Should Hire a Franchise Lawyer in Vaughan

Thinking of buying a franchise? Expanding your current franchise into Ontario? Here are a few reasons you should hire a franchise lawyer Vaughan ON.

Are you considering buying a franchise or a current franchisor thinking of expanding into Canada? If so, you may want to consult a local legal professional who specializes in franchise law.

Here are three reasons why you should hire a local franchise lawyer in Vaughan, ON:

They know what to look for

Each province has specific franchise legislation. For example, large and established franchises in Ontario are exempt from providing financial statements. However, this is only if they meet the criteria detailed in Part III of O. Reg. 581/00.

Consequently, it’s important to familiarize yourself with the way these laws vary from province to province.

They can promote fair dealing

Most importantly, a franchise lawyer can also help each party to uphold the duty of fair dealing. This is outlined in Arthur Wishart Act (Franchise Disclosure), 2000 which encourages participants in a franchise agreement to engage in good faith. Similarly, having a strong counsel may be able to prevent future complications.

They can handle disputes

If complications do occur, franchise lawyers are uniquely capable of smoothing things over. Ben Hanuka, head of Law Works PC, launched the first franchise disclosure class action in Ontario. The case — Bekah v. Three for One Pizza (2003) — involved the franchisor structuring a transaction in a way that tried to sidestep disclosure requirements. Ultimately the court sided with the purchaser with help from the franchise lawyer.

In conclusion, hiring an experienced franchise lawyer can provide you with significant legal protection.

A Franchise Gives You A Sense of Freedom & Liberty

The origin of the word franchise come from Anglo-French, meaning “freedom, liberty.” This concept was seen in the Middle Ages, when a local landowner would grant rights to serfs to use areas of land (for hunting, holding markets, or doing business.) Both the serfs and the landowners would benefit from this arrangement. Decades later, the concept and practice of franchising evolved and changed with economic structures and regulation by the law.

In Ontario, a Franchise Disclosure Document (FDD) ensures owners (a.k.a franchisors) give potential buyers (franchisees) detailed information about the franchise before the buyer signs a contract or makes any payments. The document includes details about: the franchisor (such as, business background and financial statements) as well as the franchise offer (such as costs, restrictions, training, etc.)

Franchising remains a powerful model for people to develop business success and potential profit. It is a way still focused on the original meaning of “freedom, and liberty.” Franchising is a thriving business, and it can be seen in the millions of customers who visit a franchise location – but this does not mean it comes without risks. Not only financial risk but potential disputes.

Law Works is a franchise regional boutique law firm, who advise and represent international and Canadian franchisors, master franchisees and multi-unit franchisees. Local expertise makes them an asset in franchise dispute in Vaughan. Whether you require services focused on franchise law or business disputes: Law Works is the team of professionals you want on your side.

Buying a Franchise or Starting Your Own Business?

Many of the largest and most successful businesses came from a person’s dream of becoming their own boss. Perhaps you’ve also had dreams about being a successful entrepreneur. If you have been putting some deep thought into running a business of your own, but you’re not sure whether starting your own business or buying a franchise is right for you, you’ll need to consider what would work best for you based on your knowledge, skills, experience, and life plan.

Here are some benefits of buying a franchise that doesn’t come as easily with a start-up business:

Brand awareness

Customers are more likely to be aware of the franchises brand, products, or services.  You won’t need to invest too much into a marketing strategy or have to work as hard as you would with a brand new business to get your name out there.

Established business operations

Learn the day-to-day operations of the franchise and how to operate your business at a level that has proven success. The exposure you gain from this side of the business adds so much value to your skills and experience in the business.

Support system to ensure success

A good franchisor will provide support to their franchisees to ensure success, this includes training, marketing material, and operational support. Having this in your corner takes away a lot of the risk involved in doing it all on your own.

Before deciding on buying a franchise, compile some of the types of franchises suits your skillset most and speak to a franchise lawyer who can help you narrow down what might work best for you.  With good franchises, there typically isn’t much room for negotiations with the terms of the agreement, which is why it’s so important to get legal advice first. Contact an experienced franchise lawyer in Mississauga at Law works who will help you understand exactly what you’re getting into.

Before Buying a Franchise: Get a Disclosure Document

The disclosure document includes a list of current and former franchisees. You can learn about how a franchisor operates by talking to some of them before you invest. Some questions to ask include:

  • Were there unexpected costs or additional unexpected investments?
  • Do you have to purchase a minimum amount of merchandise/materials each year?
  • If there is a minimum sales quota, how difficult is it to achieve?
  • Are products/equipment supplied by the franchisor satisfactory and delivered on time?
  • Did you have adequate support when the business first opened?
  • Was the training adequate, and were employees included?
  • How are disagreements with the franchisor handled?
  • If you could change anything in your contract what would it be?
  • What do you like/dislike about the franchisor?
  • How long did it take you to start making money, and was it more or less than you expected?
  • Would you enter into an agreement with this franchisor again?

These questions are important to ask for any franchise agreement. If you need help with franchise law or before signing any contracts, you should contact Law Works the franchise dispute lawyers in Mississauga.

Know Your Franchisee Obligations and Rights

Franchise agreements (and associated leases) are typically long-term contracts, so make sure you know what your obligations are.  For example:

  • What royalties do you have to pay? Are they dependent on sales? Net or gross sales?
  • How much are the advertising contributions? Can the franchisor use them only for advertising, and are franchisees entitled to an accounting?
  • Does the franchisor keep rebates on supplies, or are they passed down to the franchisees?
  • Do franchisees have a say in how the franchise is run?

Franchise law is complex and differs in each province and territory in Canada. For example Ontario law, which applies to any franchise operated wholly or partly in Ontario, has the following notable points:

  • A franchisor must typically provide a disclosure document to prospective franchisees.  The franchisee must be given it at least 14 days before he/she pays any money or signs anything;
  • A franchisee may have certain legal remedies if the disclosure document contains inaccurate information or if one isn’t given at all;
  • Franchisors may be liable to franchisees for misrepresentations made in the disclosure document;
  • Franchisors cannot stop franchisees from associating with other franchisees; and,
  • Both franchisors and franchisees must act with “good faith” and deal fairly with each other.

If you need help with franchising dispute or franchise law contact Law Works. Franchise lawyers in Mississauga who can help with all your business needs.