Purchasing a Franchise
Representing the interests of franchisees in Miami-Dade County and throughout the State of Florida
The purchase of a franchise may appear to be a very attractive way to buy a business and still be one’s own boss. Many times that’s the case. Nevertheless it is very important for a franchisee to consult with a business attorney who has experience in franchise law and reviewing and negotiating franchise agreements. For the franchisee (you), it is important to understand that the franchise agreement is written by the franchisor’s attorneys and generally is very much one-sided in favor of the franchisor. That agreement will legally obligate you, as the franchisee, to do or refrain from doing certain things.
Franchise Agreement
By signing a franchise agreement, the franchisee is entering into a formal contract which obligates the person or business to comply with various provisions. Two major obligations will be: 1) the obligation to pay a defined royalty at a specified rate to the franchisor pursuant to a specified schedule; and 2) the obligation to abide by the terms of the agreement for a minimum period, generally a minimum period of at least 5 years. The franchise agreements will generally contain a “renewal” provision.
The business law attorneys at Troy and Schwartz have represented numerous potential franchisees or existing franchisees from reviewing franchise documents, including required disclosure documents, to negotiating with franchisors on behalf of the franchisees. In some cases, the potential franchisee decided to forgo entering into the franchise agreement altogether because the terms were too onerous. In other cases, the franchisee was allowed to “get out” the franchise agreement before the actual termination date. Finally, in other cases, the franchisees were able to prove that the franchisors did not live up to their end of the bargain because they sold competing franchises within a geographical area as defined by zip codes that had been “blocked out” in the franchise agreement, thereby effectively interfering with their respective franchisee’s customer base. As a result, the franchisors either refrained from filing a lawsuit or dismissed their respective lawsuits against the franchisees for failure to pay the minimum required royalty due under the franchise agreement.
Purchasing a Franchise
If you are considering purchasing a franchise to be based in the State of Florida, the attorneys at Troy and Schwartz are here to serve you. Our objective will be to alert you to the potential pitfalls/risks of purchasing the franchise. In some cases, we may be able to negotiate more favorable terms depending upon the flexibility of the franchisor. We will also review the documentation provided by the franchisor (separate from the franchisor agreement) to ensure that the franchisor is complying with all disclosure laws and has been truthful in said disclosures. Either way, we will work with you so that you will have a clear understanding of your obligations to the franchisor should you decide to finalize the deal as well as a high level of comfort that the relationship will be a win-win for both of you from a financial perspective.
We are also here to serve you if you are an existing franchisee that has a dispute with the franchisor. If the dispute has not risen to the level of an actual lawsuit, we may be able to help you obtain a resolution without having to resort to expensive, time-consuming litigation.
If you are contemplating the purchase of a franchise or have a dispute with a franchisor, call us at (305) 279-4740 or contact us online for a FREE consultation.
