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What should I look for in a franchising agreement?

Starting your own franchise is a wonderful way to own your own business. It can enable you to have autonomy and independence while still having a support system in place. Before launching your franchise, you should be aware of several important components that should be in the contract you will sign.

One key item that every franchising contract should have is what the franchisor’s obligations are. At minimum, you should be able to learn what kind of support you will have as you launch your business. Any fees that will be assessed for that support should also be spelled out in the document.

As Entrepreneur magazine points out, the franchising agreement should have clear language that outlines how your operation must run. This will enable you to understand what is expected of you. If the contract seems vague, you should ask for clarity so you do not risk making a mistake and facing legal repercussions. If any of the rules make you uncomfortable, you may want to speak with the franchisor about them or search for another opportunity.

Another important aspect of these contracts is a clause that specifies the protection you would have against same-brand competition. For example, if you are going to start offering a service through a franchise and someone else in your area starts doing the same, do you have any legal protection? Prior to investing your money into an operation, you should feel confident that you will not have to worry about competition from someone else promoting the same brand.

Lastly, make sure the agreement has information regarding how any dispute that arises may be resolved. The document could list arbitration as an option as well as dictate that the losing party will pay for the other side’s attorney fees.

While this information may be useful, it should not be taken as legal advice.

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