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Franchise Business- Legal Issues

A good franchising relationship between the Franchisor and franchisee is crucial for the growth of both parties. Just because it is franchising that develops a business relationship for years, its foundation must be strongly built by fully understanding the Franchise program. Understanding the legal franchising terms is just impossible for parties. So, it is highly recommended to take an advice of a Latin America Franchise Attorney to understand the legal issues and to save one from making expensive business mistakes in future. Franchising is normally governed by state and federal laws that need franchisor to give the information on franchisor-franchisee relationship to the new franchisees.

The main legal documents are:

1. The Disclosure Agreement or FDD
FDD gives detailed information about the franchise system, the franchisor, and the Franchise Agreement which they are going to sign. Also, the FDD includes the actual franchise agreement clauses and other agreements which the franchises will be required to sign, in addition to the financial statements of franchisor. FDD is especially designed by the franchisor to give some crucial information about investing in a specific franchise business. As per franchise law, a franchisor can’t sell a franchisor until he has not given a FDD to the prospective franchisee. Normally, a FDD includes details about:

  • Management’s experience in franchise management
  • Required investment and purchases
  • The franchisor
  • The company’s key staff
  • Territory rights
  • Franchisor’s bankruptcy and litigation history
  • Initial and ongoing fees involved in opening and running the franchise
  • Responsibilities of the franchisor and franchisee
  • The contact details of other franchisees that are associated with the franchise business

2. Franchise Agreement
Franchise Agreement is a final legal document about the relationship terms between franchisee and franchisor. A franchise agreement usually includes information about:

  • Rights and obligations of the parties: standards, procedures
  • The franchise system, such as use of trademarks and products
  • Payments made by the franchisee to the franchisor
  • Term (duration) of the franchise
  • Territory
  • Training, assistance, and advertising
  • Termination and/or the right to transfer the franchise

In short, franchise agreement is a legal and well-written document that administers the franchisor-franchisee relationship and specifies the franchise purchase terms and conditions. If you are thinking to purchase a franchise, it is always advised to take the help of a professional advisor before taking a final decision.

Potential franchisees can consult us- the best franchise attorney firm to know the business prospects of International Franchises in Latin America.

This post first appeared on Master Franchisees: Benefits You Must Consider – Franchiselawus, please read the originial post: here

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Franchise Business- Legal Issues


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