Business and Tax Lawyer Blog

As with any other high-ticket expenditure, considering purchasing a franchise can be a tough decision. There are a number of things to keep in mind in order to avoid surprise.

Franchisees have limited power. There is a misconception that purchasing a franchise is like becoming a partner in the business. This is untrue. Though a franchisee may own the store or restaurant as well as the operations at that location, the franchisor establishes company policy and sets standards for quality control. For example a Burger King franchisee who disagrees with a new pricing structure may suggest alternatives, but is in no position to alter the policy.

Franchisees and franchisors do not necessarily have the same goals. While the franchisee's primary purpose is to meet the needs of consumers, the franchisor's main goal is to recruit more franchisees. Both sides share the common purpose of building the brand, though through different approaches. In this case, the franchisor ensures each franchisee understands the value of the product or service. Also, the franchisor ensures strict compliance with quality control standards. In return, franchisees ensure employees at each location understand their role in the business. Franchisees may also educate the franchisor. Because franchisees interact directly with consumers they are in a position to update the franchisor regarding whether services or products are meeting consumer expectations.

Franchisees have multiple safeguards. The franchisee franchisor relationship is protected by the Federal Trade Commission (FTC). The FTC requires franchisors to follow certain procedural guidelines when limiting a franchisee's earnings. Further protection is provided in the Uniform Franchise Offering Circular (UFOC). The UFOC defines the duties of each party.

The rewards of owning a business are immeasurable.  To learn more about the specifics involved in purchasing a franchise, contact an attorney to arrange a consultation.