Florida Franchise Law: Do I Want to Be Part of a Franchise?
There are a number of good reasons to be part of a franchise relationship. For prospective franchisees (the person buying on a franchise), one initial consideration may be the minimization of start-up costs. In exchange for upfront payments and/or monthly fees, the franchisor provides a ready-made business foundation.
The actual contribution of the franchisor can vary greatly and may include physical items as well as intangibles, such as customer goodwill and employee training. The franchisor may assist you in locating and obtaining a physical space of business, and will likely share important details about the business model. Your franchise will probably be able to use the branding and supply chain of the franchisor.
If you’re thinking that being part of a franchise sounds great, you may be right. Buying a franchise can be highly beneficial and profitable to both the franchisor and franchisee. Before entering into a franchise agreement, however, you are advised to consult a Florida business lawyer. Generally, franchise relationships are dictated by a number of agreements that delineate the parties’ rights, obligations and responsibilities; and these franchise agreements can be lengthy and cumbersome.
Disadvantages of Franchise Ownership
For some prospective businesspeople, the terms of the investment may be a deterrent to becoming involved in a franchise. Because the franchisor expends significant initial and ongoing resources to help establish and maintain a franchise, there is generally a specified term during which the franchise relationship must be maintained, and there is often a significant penalty for breaking the agreement. A Florida contract lawyer can help you understand the terms of such an agreement, and can help you reach terms that are fair and acceptable to both parties.
Another possible downside of becoming a franchisee is the lack of freedom you may experience as the leader of a franchise business. Unlike a small business owner, a franchisee is largely beholden to the franchisor and its methods of training, advertising, selling products and services, and dealing with customers. Additionally, you will normally be required to comply with the franchisor’s pricing structure. For some, the lack of autonomy outweighs the reduced risk and relatively low upfront investment of running a franchise.
A third potential disadvantage of buying into a franchise is that most franchisors require a non-compete agreement or restrictive covenant, which will legally prevent you from entering into direct competition with the franchisor for a certain period of time after the termination of the franchise contract. A Florida business attorney can help you understand the full implications of such an agreement, but it is typical for franchisees to agree to refrain from competing within a legally defined area in the same industry as the franchisor. That is, if your subsequent business would or could potentially take business away from the former franchisor by virtue of its existence, you would not be able to operate said business for the duration of the agreement.
Thus, while becoming part of a franchise can help you gain essential business knowledge and an understanding of a particular industry, you may face difficulty if you try to strike out on your own in that industry. It is essential to consult a Florida business lawyer when weighing the advantages and disadvantages of entering a franchise relationship.
What Do I Need to Know About Contract Law?
Still unsure about whether you want to invest in a franchise? Or not quite clear on what exactly constitutes a franchise? This article has presented a brief overview of the advantages and disadvantages of franchise ownership, but the information here does not explore the full complexity of the process of entering a franchise relationship, your rights and responsibilities as a franchisee, or how to identify a promising franchise opportunity.
If you are ready to seriously explore the possibility of joining a franchise, it is highly recommended that you seek out assistance from a Florida business lawyer. Quality legal advice is particularly essential in Florida since the State has a relatively loose legal definition of “franchise.” In fact, a written contract does not necessarily have to exist in order for a business relationship to be considered a franchise.
Florida law defines a “franchise or distributorship” as any oral, written, express, or implied agreement in which a commercial relationship of definite or continuing duration exists, one party (the franchisee) gains the right to sell, distribute, or offer goods or services made, branded, or organized by the other (the franchisor), and the franchisee operates as a separate business but is part of the franchisor’s distribution network. Additionally, business operations must be “substantially reliant” on the franchisor/supplier for the goods or services provided.
ABOUT THE AUTHOR: Nico Apfelbaum
Nico Apfelbaum, Esq. is the managing attorney of Apfelbaum Law, a Florida law firm serving Port St. Lucie, Stuart, the Treasure Coast and assisting clients with matters throughout Florida. Apfelbaum Law provides a wide variety of legal services, including, family law, divorces, business and contract transactions and litigation, immigration, wills and estate planning, probate law, and real estate law. The attorneys of Apfelbaum Law will answer your questions, explain your options, and provide you with the tools and resources you need to make an informed decision.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.