Posted by admin on Jan 4, 2010 in
Franchise What’s the difference between franchising vs. licensing a business? The starting point in the franchising vs. licensing a business analysis is to consider the legal aspects, then the business aspects. In considering the legal aspects, begin with the following premise that applies to both options. If you put someone into business (or allow them to use your business name/mark) this transaction will normally be a regulated activity, subject to substantial penalties for noncompliance.
This guiding legal principle, coupled with the business aspects of selling a franchise vs. a license (discussed below) will answer most franchise vs. license questions. Advice from a competent franchise attorney is indispensable.
BACKGROUND OF FRANCHISE & BUSINESS OPPORTUNITY LAWS
Why does regulation exist? The government, due to documented past abuses where tens of thousands of individuals lost all of their net worth by investing in nonexistent or worthless business endeavors, has devised two principal consumer protection mechanisms:
(1) franchise disclosure-registration laws; and
(2) business opportunity laws.
The thrust of these laws is to require sellers to give potential buyers enough pre-sale information so informed investment decisions can be made before money changes hands, long-term contracts are signed and sizeable financial commitments are undertaken. Under federal regulations, a Franchise Disclosure Document (FDD) covering twenty-three individual chapters and a hundred or more pages in length must be prepared and given to every potential buyer at least 14 calendar days before any contract is signed or money paid. Read more... (2599 words, estimated 10:24 mins reading time)
Tags: business, Expansion, Franchise, Franchising, License, Licensing, Opportunity, Options
Posted by admin on Nov 16, 2009 in
Franchise Franchising can be a great way to start your own business.
And the failure rate for franchises is much less than for non franchise start-ups.
But you still need to do your homework and ask and be satisfied about many questions which you might not think about in your enthusiasm to start your own business.
The franchise agreement from a major franchisor will generally be on a take it or leave it basis.
That is the franchise agreement will not be negotiatable as the franchisor can’t afford to negotiate individual franchise agreements with each franchisee.
But that does not mean that you should not ask the right questions and satisfy yourself that the situation that arises when there is a dispute or the franchisee is incapacitated or dies is provided for.
1. What law governs the franchise agreement?
Many successful franchises in Ireland are not Irish companies………..the law applicable for an international franchise may well be another jurisdiction.
2. What happens if the franchisee dies?
Is there provision in the franchise agreement for the franchisor to provide staff to run the business to keep the show on the road?
3. Is there a renewal option when the franchise agreement ends?
If there is are you happy to commit to sign a franchise agreement in say, 10 years time, having no opportunity to see the new agreement? What are the terms?
4. Can you sell the business? Can the franchisor veto your purchaser?
5. When the franchise agreement is terminated is there a non compete clause? For how long?
6. If the franchise agreement is terminated and the premises is yours, how much will it cost to debrand?
7. Is the training and system manual up to date? When was it last updated?
8. Is there an advertising fee payable? Can it be justified? Is there marketing spend on the brand?
9. Is there a management services fee? How is it calculated?
10. Does the franchisee have to inform the franchisor of any improvements he has made to the system? Read more... (762 words, estimated 3:03 mins reading time)
Tags: Franchising, own business, The Franchise Agreement