When you purchase a franchise, you’re buying an established business model that has been successful for other operators in the past. While it’s great to have a pre-designed business structure and marketing strategy, your location and target market may require some adjustments to make it work optimally. Whether you are buying or selling a franchise, the legal documentation is essential for protecting yourself as well as your business partner. Understanding the importance of a well-written document from the onset will help you negotiate with more confidence and avoid costly pitfalls down the road. Both parties should have their own attorney review the final documents before signing anything. A strong contract leaves little room for interpretation; both parties should understand exactly what they are getting into with each clause and condition. Here are five reasons why a proper Franchise Agreement is important to your business’s success:
Franchise Agreement Define All The Rules
Franchisees and franchise owners are subject to numerous rules, some of which may not be explicitly stated in the franchise contract. While a few of these may be legally required, most are simply best practices that the franchisor hopes all franchisees will abide by. If there is a dispute between you and the franchisor, it is best if you have written rules to refer back to. A simple rule like, “All franchisees must commit to a minimum of 20 hours per week working in their store” can help you avoid a lot of headache down the road.
Franchise Agreement Ensure You Know Exactly What You’re Buying
As a buyer, you need to understand what you’re getting into. The franchise contract is the best way to understand the risks, ongoing investment, and projected profits for your new franchise. Before you sign on the dotted line, be sure to ask the franchisor for specific details pertaining to the following: – Capital investment: How much money do I need to invest when starting the business? What are the ongoing capital requirements? – Expected sales/profits: What is the average net sales growth for the past 3 years? What is the average EBITDA margin for the past 3 years? What is the expected growth rate for the next 5 years? – Expected growth: How many new units do you plan to open in the next 5 years? – Competition: What are the main competitors in the market?
Franchise Agreement Protect Against Branding Mistakes
While it’s a good idea to include a section in your contract that discusses ways to protect the franchisor’s trademark, you should also include a section that outlines how to protect your brand. As a franchisee, you are typically responsible for every aspect of the business, including branding, website, and visual identity. The last thing you want to do is find yourself in a legal battle with your franchisor over these areas.
Franchise Agreement Help With Ongoing Operational Support
The franchise contract is a great place to outline the ongoing support you will receive from the franchisor, especially in the early years of operation. There are numerous tools and resources that the franchisor has developed and continues to refine over time. By including these in your contract, you can lock in access to training, marketing support, and even marketing funds up to a certain dollar amount. If there is a specific support area that you feel you may struggle with, now is the time to negotiate an option to get extra support. For example, if you know you need help with food safety training, now is the time to ask the franchisor if they can provide some assistance.
Franchise Agreement Protect Your IP And Confidential Information
Franchise contracts are full of sensitive information and intellectual property (IP) that can be problematic if it ends up in the wrong hands. If someone steals your trade secrets, you could suffer significant financial losses. The best way to protect against this is to include a non-disclosure provision in your contract. This will state that both parties must maintain confidentiality and refrain from sharing sensitive information with anyone else. You can also request that the franchisor provide you with a non-disclosure agreement before sharing any sensitive information. This way, you can protect yourself from receiving confidential information and breaching their trust.
Conclusion
Regardless of whether you’re buying or selling a franchise, the legal documentation is essential for protecting yourself as well as your business partner. Understanding the importance of a well-written document from the onset will help you negotiate with more confidence and avoid costly pitfalls down the road. When you purchase a franchise, you’re buying an established business model that has been successful for other operators in the past. While it’s great to have a pre-designed business structure and marketing strategy, your location and target market may require some adjustments to make it work optimally. If there is a dispute between you and the franchisor, it is best if you have written rules to refer back to. A simple rule like, “All franchisees must commit to a minimum of 20 hours per week working in their store” can help you avoid a lot of headache down the road.
Become a Spartans Boxing Club Franchisee
With a proven business model that has returned incredible profits year-over-year for our franchisees and an offering of all that you need to succeed in the operation of your franchise, there’s no better opportunity than the one here at Spartans Boxing Club.
If you’re interested in becoming a Spartans Boxing Club franchise owner, or you simply want to learn more about the business and its offerings, be sure to contact us at franchise@spartansboxing.com. We look forward to hearing from you!