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.

What You Should Know About a Franchise

A franchise is essentially a license to operate the franchisor’s business system and use its trademark according to the franchisor’s standards. The term is normally for between 5 and ten years, depending on the agreement and the lease. In exchange for the right to carry on business under the franchisor’s trademark and system, the franchisee usually pays the franchisor an initial fee for these rights (somewhere between $15,000 and $100,000), and an ongoing royalty linked to the gross sales of the franchised outlet (between 5 per cent and 8 per cent of gross sales). There’s usually a requirement for the franchisee to make regular contributions to a regional or national advertising fund as well (between 1 per cent and 4 per cent of gross sales), so that the franchisor can advertise the brand in high-cost media using the contributions of all franchisees. If it’s a bricks and mortar business, the franchisee either constructs and develops the premises itself (at its cost) or can buy the constructed premises on a ‘turnkey’ basis from the franchisor.

Franchisors are essentially selling three things: the value of a (hopefully) recognizable trademark and brand; the know-how associated with the franchisor’s business system (and the franchisor being able to teach that know-how to the franchisee); and the lower unit costs that come from the purchasing power of a large buying group. If you need help with a franchise in Ontario contact Law Works in Vaughan.