Understanding Franchise Laws

There are a multitude of laws for any business model, from a simple, family-run small business to a multimillion dollar industry. However, franchises tend to have more laws and regulations than your average small business. Most of these regulations lie within the franchise agreement.

Understanding the franchise agreement is an essential first step to running a franchise. The entire franchise/franchisee relationship is outlined and governed by the contract.  Breaches of this contract are the main source of issues in franchise law.

Many common issues that may arise between the franchiser and the franchise have to do with the royalty system. Many franchise agreements outline the exact method of how a franchisor will collect royalties. Sometimes, these systems may cause franchisees to cut corners or costs to maximize their profits and decrease the profits of the franchisor.

For example, many franchise agreements allow the franchisor to take a percentage of the total revenue, while the franchisee earns money based off profit. When this is the case, the franchisee may try to cut costs to maximize profit while not necessarily maximizing revenue. This leads to issues and disagreements between the franchisee and the franchisor.

A highly experiences franchise attorney knows how to draft through and complete franchise agreements that do not leave any room for these issues toa rise. And in situations where these issues are already present, a franchise attorney can help mitigate the disagreement between the franchisor and franchisee and restore the relationship, or find an alternative way to settle issues and terminate the contract.

If you’re considering starting a franchise, or if you are currently part of one and experiencing difficulties, than you should consider contacting a franchise attorney. Our attorneys here at KFB-Law are highly experienced and ready to help you with all of your legal issues.

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