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 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 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.
Watch out for changes to franchise law. In Massachusetts, bills known as the Fair Franchising Act have been drafted that would shift the balance of power back toward franchisees, Katz said, by making franchisors liable for financial damages caused to franchisees, and limiting circumstances under which a franchisor can terminate a contract, among other provisions. Katz said no one knows what the final bill might look like, or if it will pass, but if it does, franchisers will likely have to modify their regulations and may pull back, somewhat out of caution. And, be wary of any franchisor that verbally promises a certain level of profits without providing the same in writing. The most useful information can be gleaned from other franchisees.