Buying a franchise can be a good investment option if you’re a risk-averse individual because success is almost guaranteed and it involves minimal risk. For instance, the buyer will not start the business from scratch–the groundwork is already laid by the franchisor.
Although the success rate for franchising is typically high, a master franchisee cannot be successful without understanding the dynamics of international franchising. Having said that, consulting international franchise litigation lawyers is the best way to protect yourself if you’re considering international franchising.
What Should a Master Franchisee Expect?
International franchising is one of the best ways to expand a domestic business abroad. An entrepreneur who wishes to expand internationally makes an offer by advertising a franchising opportunity in the target country, aiming to recruit a master franchisee.
The recruited master franchisee pays a consideration for the offer – franchise fee, to gain the rights of operating a master franchise in their country of origin. Franchisors are obligated to meet the expectations of master franchisees, such as:
1. A Professional Image
Research shows that having a professional business outlook is key to succeeding in business. Consequently, no investor would want to associate themselves with a business that lacks a professional image. Always remember that first impressions last and hence, it’s important to act professionally because prospective clients and investors will be watching. The following are some of the things that can help franchisors achieve professionalism:
- Having a company website;
- Marketing and advertising;
- Opening offices;
- Employing qualified manpower;
- Branding;
- Helping unsatisfied clients;
- Providing quality products and services;
2. Real Upfront Cost Estimations
Any investor would want to have a true picture of their financial obligations before committing themselves. Consequently, prospective buyers will undoubtedly try to find out more information about the investment costs related to the franchising deal. Such information should not only be easily accessible but accurate. For instance, if the upfront investment costs range from $300,000-$500,000, the initial negotiation should be based on those figures and nothing more.
3. Territorial Protection
Imagine starting a franchise business in a certain area only for another similar business to be opened in the same territory. This would make the franchisee angry because having a similar business near them means unnecessary competition. We understand that competition in business is healthy and legal not illegal, but who wants to lose business to a competitor? Franchisors are obligated to ensure that would-be franchisees are guaranteed territorial protection. How? By consulting a franchising attorney for legal counsel.
4. Provision of On-going Support
Franchising Law requires franchisors to provide ongoing, support to franchisees. Such details should be specified in the Financial Disclosure Document (provided to prospective buyers before signing a contract. The scope of “support” can vary by business, but whatever the case, prospective buyers expect to be supported in various ways, including:
- Technological challenges support;
- Handling customer complaints;
- Field visits;
- Providing ongoing training;
- Providing support related to legal issues; and more.
5. Site Selection
Legally, franchisors have the right to select a business site or location of their choice to avoid future disputes. Having said that, a franchisee should involve the franchisor when selecting a business site in their country of origin. This can be done by making suggestions to the franchisor and asking for their opinions before settling on a particular site. The franchisor or mother company should advise the franchisee accordingly because they understand what works, regarding site location, in that industry.
Why You Should Involve a Franchising Attorney
You’ll naturally become overexcited and even start building imaginary castles when being considered by the franchisor. Such excitement can impact your decision-making process. In other words, you’ll not be in the right state of mind to make certain decisions and that’s why you should consider involving another person to act in your stead. Whom can that be if not a franchising attorney? The attorney can help you in the following ways:
- Obtaining and analyzing the franchisor’s comparative financial data;
- Analyzing the Financial Disclosure Document for mandatory disclosures;
- Developing a strategy for conducting due diligence;
- Ensuring that the terms of engagement with the franchisor are fair and just;
- Acting on your behalf when legal disputes arise.
4 Qualifications of a Competent Franchising Attorney
The qualities of a competent franchising attorney can include
Role Model Behavior
- Proactive and contributes to new ideas.
- Reliable, available, and trustworthy.
- Honest and oozes confidence.
- Helpful in different other matters (multi-tasking).
1. A Good Lawyer Should Exude Positive Energy
- Motivates clients even when there’s no hope.
2. Organization Skills
- Great managers in all issues.
- Excellent file management skills
- Works methodically.
- Time management and meeting deadlines.
3. Should be Passionate
- Passionate about law for efficiency.
4. Should be an Excellent Communicator
- Proficient in English, written and verbal.
- Comfortable with emails, video calls, telephones, and audio calls.
Prospective franchisees should consider whether their interests are safeguarded before signing the contract. The advice of a legal professional specializing in franchising law can be invaluable at this stage.
