If you`re considering starting a franchise, you need to be aware of the many legal issues associated with franchises. If you`re new to the business, it`s probably a good idea to hire a small business lawyer to review the franchise agreement. AGENCY RELATIONSHIP: Generally, the relationship between the two parties in a franchise agreement is that of an independent contractor, but sometimes it can be considered an agency. For example, if the franchisee has the opportunity to enter into contracts with third parties in the interest of the franchisor, the relationship could be called an agency. It is explicitly important to describe the relationship between the two parties in a franchise agreement in order to avoid legal problems with them. But the good news is that these problems can be vaccinated relatively easily. Starting a franchise can be a great way to become a small business owner without going through many of the growing pains that small business owners typically go through. However, franchising also presents many unique legal issues that other small business owners don`t face. A good relationship between franchisor and franchisee is crucial to the success of both parties. Since franchising has been establishing a business relationship for years, the foundation must be carefully built through a clear understanding of the franchise program. Unfortunately, understanding the legal language of franchising can be intimidating.
The advice of an experienced franchise lawyer should be sought to help a potential franchisee understand legal issues and protect them from costly mistakes. Franchising is subject to federal and state laws that require franchisors to provide prospective franchisees with information describing the franchisor-franchisee relationship. The two main legal documents for franchising are: There are always risks associated with franchising systems. However, with the help of a franchise lawyer, you can minimize or avoid many of these issues and get an easier path to franchise success. Work with your franchise attorney to train all your salespeople on franchise law and make sure they take refresher training once a year. As part of this training, ask them to take a test on the basics of franchise law to ensure they understand the issues. Keep these tests for your files. Problems arise when the franchisor does not offer this type of support to its franchisees. It is also for this reason that franchisees must understand the franchise agreement. If the agreement promises commercial support, the franchisor is legally obliged to provide it. Otherwise, franchisees are left to fend for themselves.
To learn more about what franchising is, watch the video below – To schedule a consultation with a franchise lawyer from our team at Mulcahy LLP, call us today at 949.252.9377 or contact us via our contact form. Competition law generally prohibits EU and national competition law from imposing many of the usual restrictions on franchise agreements. However, both EU and national law contain „block exemption rules“ for vertical agreements such as franchises. These effectively exempt franchising from the main controls of competition law under certain conditions. Make sure your training covers all of the following topics: Franchise agreements may require franchisors to provide some support to their franchisees. If franchisees discover that they are not receiving the support to which they are entitled under the contract, they can take legal action to resolve the issue. A franchise attorney can help clarify what the legal requirements are for the franchisor to assist franchisees. CONSUMER PROTECTION: Customer objections and lawsuits are a potential issue that both parties need to remember. Under the Consumer Protection Act 1986, a consumer may lodge a complaint about unfair trading practices or defects in goods in a consumer forum. The franchisor and the franchisee are liable for such defects or defects. Therefore, appropriate regulation on this legal issue must be formulated in a franchise agreement.
INTELLECTUAL PROPERTY RIGHTS: All franchise agreements involve some kind of invention or creation of designs that must be trademarks.