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.

 

What Franchisees Need to Know About The Arthur Wishart Act

What Franchisees Need to Know About The Arthur Wishart Act Law Works

The idea of franchising is popular amongst those who dream of being in business, but simply don’t have the resources or experience to start out on their own. When franchising, they can rely on the experience of well established businesses as a way of learning all the how-to’s of running a successful business.  

Whether you’re an established franchisee or considering becoming a franchisor in Ontario, it’s important to familiarize yourself with Ontario’s franchise legislation. The Arthur Wishart Act (Franchise Disclosure) was first introduced in 2000 for the purpose of helping potential franchisors, as well as franchisees make more informed decisions when you chose to invest.  The legislation protects franchisees by providing the right to associate and share information with other franchisees, so you can share information about your business experiences before entering into or during your franchise agreement.

Furthermore, under new legislation the franchisor is required to provide a disclosure document at least 14 days before you sign an agreement or provide any payment. The disclosure documents should include details of the franchise’s background and the offer such as:

  • Business background
  • Litigation history
  • Bankruptcy
  • Financial statements
  • Costs (e.g. deposits or fees)
  • Copies of proposed franchise agreements
  • A description of any exclusive territory
  • Any restrictions
  • The franchisor’s policy on volume rebates
  • Conditions of termination, renewal or transfer of the agreement
  • A description of the franchisor´s mediation process, if one is used
  • Training and other assistance programs
  • Advertising funds
  • A list of their current and former franchisees

Before signing any offer or providing payment, you are highly encouraged to seek a franchise lawyer. To determine whether or not the franchise has provided a fair and honest representation of the proposed agreement in the disclosure document and to verify it is compliant with the Act as required. 

Get in touch with an experienced franchise lawyer at Law Works in Vaughan, we’ll be happy to answer all your questions and provide the guidance you need to make these important decisions.