From Startup to Expansion: Legal Guidance for Franchisees Navigating the Franchising Process
Franchising remains an extremely popular option for starting and growing a business heading into 2025. While many franchisees are content with owning and operating a single outlet, there are also those whose goal is to use the franchising model to build an expanding business empire. If you fall into this latter category and are at the beginning stages of the process, here is a brief introduction to what you can expect along the way:
Buying Your First Franchise
Unless you acquire an existing outlet, your journey will start with buying your first franchise from the franchisor. This is a process in itself, with some of the key steps including:
- Attending a “discovery day” with the franchisor
- Speaking with current and former franchisees
- Reviewing the Franchise Disclosure Document (FDD) and franchise agreement
- Negotiating key terms in your franchise agreement
- Making sure you are confident that you will be able to open your outlet on time
Even if your ultimate goal is to acquire additional outlets in the future, it is important not to overlook any of the key steps at this stage. Not only could doing so put your first franchise in jeopardy, but it could jeopardize your future expansion plans as well.
Considering Multi-Territory Opportunities
If one of your goals is to become a multi-unit franchisee, you may want to consider a multi-territory opportunity during the buying process. Different franchisors structure these opportunities differently, with area development agreements and area representative agreements being two of the more popular options. Of course, while securing additional territories at the outset provides additional opportunities, it comes with additional risks as well—so informed decision-making and careful planning are essential.
Buying Your Second (or Subsequent) Intra-Brand Franchise
When buying a second (or subsequent) franchise from the same franchisor, it is important not to assume that everything remains the same. It is equally important to give due consideration to any lessons learned. You will almost certainly be required to sign the franchisor’s “then-current” franchise agreement, which may be materially different from the agreement you signed previously; and, if anything in your current franchise relationship isn’t working for you, this may be worth addressing during the negotiation process.
Expanding with a Different Franchise System
If you are interested in pursuing opportunities with multiple franchise systems, you will need to do your due diligence all over again. You will also need to review your existing franchise agreement (or franchise agreements) to ensure that they do not interfere with your plans. In particular, you will need to pay close attention to your non-competition and non-solicitation obligations—which may prevent you from pursuing certain opportunities in certain areas.
Speak with a Franchise Lawyer at Rendigs
Do you have questions about entering into the world of franchising or expanding your franchise portfolio? If so, we can help, and we invite you to contact us for more information. To schedule a consultation with a franchise lawyer at Rendigs, give us a call at 513-381-9200 or tell us how we can reach you online today.