Franchising is an excellent option for many entrepreneurs and growing businesses, but comes with great responsibility. Franchising is a heavily regulated legal field and can present many pitfalls. Jameson Law strives to walk its clients through this area of law and lead the way. The firm provides comprehensive planning regardless if you are building a franchise system or looking to purchase a franchise.
If you are not sure you are ready for a franchise system, but considering a licensing program or some other arrangement, please review this article regarding potential issues. Regardless if you are considering creating a franchise system or thinking of purchasing a franchise, it is important to consult an attorney with experience with franchise law. The field is heavily regulated by federal and state laws and you need someone who can navigate you through the process.
What is a Franchise?
Under the FTC Rules, a franchise is defined as “any continuing commercial relationship or arrangement” made orally or in writing in which:
1. The franchisee will obtain the right to operate a business that is identified or associated with the franchisor’s trademark, or to offer, sell or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark;
2. The franchisor will exert or has authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation; and
3. As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate. For more information regarding the federal requirements for a franchise, please click here.
At its core, a franchise is a business relationship in which the franchisor grants the franchisee a license to conduct business under its trademark and provides support and assistance for operations and/or marketing, in return for a fee from the franchisee.
The federal rules can be considered a legal floor for regulations, or the least restrictive. Many states also have franchise and business opportunity laws that are more restrictive on franchises that can be costly if franchise systems are not in compliance with the state's laws. For a chart of each state and their status, please click here.
Jameson Law assists in building franchise systems from the ground up. While ideally the firm likes to begin the process from the opening of a client’s first unit, the firm can assist in the process regardless of the maturity of the company. After an initial consultation to discuss the stages of franchising, Jameson Law starts with the foundation. The firm drafts the Franchise Disclosure Document ("The FDD") and accompanying agreements, obtains state franchise registrations, and provides ongoing franchise compliance counseling services. Jameson is with you for the long term; the law firm for your future.
If you are interested in purchasing a franchise or have received the FDD from a franchise, Jameson Law is here to assist. Jameson will review and analyze the initial disclosure documents, then discuss with you. The main goal is minimizing your liability while maximizing your profitability and since the firm drafts FDD's and other franchise documents, it has a better understanding of the documents and how to best negotiate their terms. The firm focus is normally towards royalties and other fees, prior litigation, performance of other franchisees, and any restrictions the franchisor will place on you. Once you determine a franchise is right for you and ready to purchase, Jameson Law will counsel you through the process, including forming your new entity.