Interested in franchising? First, think about the cost, said David S. Katz, head attorney at Westborough based David Katz Law Group, who represents both franchisors and franchisees.
“They've got to realize that it is a significant investment,” Katz said.
That means to get a financial planner, get an accountant, and yes, set aside funds for an attorney to vet your franchise agreement closely. That agreement lays out what you and the franchisor can and cannot do, royalties and fees, the proximity in which the franchisor can establish other locations, and the rules surrounding the termination of the agreement.
Katz said it's also crucial to research the franchise. Talk to other franchisees of the same brand. Ask about their financial performance and whether they get enough company support.
In Massachusetts, bills know as the Fair Franchising Act have been drafted with the impact of shifting the balance of power back toward franchisees, Katz said, by making franchisors liable for financial damages caused to franchisees. The bill would also limited circumstances under which a franchisor can terminate a contract, among other provisions. Katz said that no one knows what the final bill will look like or whether it will pass the legislature. In the event that this bill does become law in Massachusetts, franchisors will likely have to modify their regulations and may pull out of the state if they cannot comply with the law's new requirements. Katz continued to add that franchisees must be wary of any franchisor that verbally promises a certain level of profits without providing the same in writing. The most useful information about the success or lack of success of any franchise system is always information obtained by other franchisees, Katz added. For further information regarding your franchise rights, call us at the Katz Law Group at 508-480-8202.