As a current or future franchisee, you have a lot on your plate. But sifting through the complexities of a franchise agreement should be a priority.
Owning a franchise in any industry is a large investment and an agreement that locks you in for many years. As such, it’s essential to inspect areas where the contract terms or process may not have your best interest in mind.
If the franchisor you plan to work with sets very short deadlines for signing the franchise contract or submitting fees, then they might not be a great partner in the long run. Rushed deadlines don’t offer enough time to review the contract or negotiate portions of the contract you might have questions or concerns about. And pressure to pay franchise fees could be an early indicator that the franchisor values money over building healthy relationships with their franchisees.
Not offering plenty of time to look over the franchise disclosure document (FDD) should also raise a level of suspicion. An FDD contains information about the company’s history, financial information and litigation.
Holding off on releasing this document last minute is shady, because it makes it seem like the franchisor doesn’t want new franchisees to get a full scope of the company’s records. One thing a franchisor might want to keep out of sight is the list of all the legal actions taken against them. Not being able to resolve a long list of disagreements without going to court, could prove that working with a different company might better serve your goals as a business owner.
Right to an attorney
Another red flag to look out for when signing a franchise contract, is a plead to not consult an attorney. Getting a full understanding of the contract shouldn’t discouraged by the rep presenting it to you.
Questioning if the franchise agreement is safe to sign doesn’t have to be a solo decision. As successful business owner, you should be familiar with the legalities of the agreement. However, you also have the option lean on a business law attorney to help answer questions or guide any negotiations.