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Legal Documents required for a franchise business

By Edited Mar 10, 2016 0 0

You are a business owner and you decide that franchising your own business is the best way to expand your business. Before you do, there is a lot of considerations you need to take into account. Besides all the market research, suppliers, costs, value and franchise fees you need to put in place, there are a lot of legal issues you have to know about.

When you franchise your business, you will need a couple legal documents that are specific to franchise businesses. Besides other legal documentation, you must have a franchise agreement and a franchise disclosure document created that is specific to franchise businesses. For most of the work involved with these documents, you should acquire a good franchise lawyer to assist with the setup of these documents. Franchise lawyers know the ins and outs of franchise businesses and how to best set your self up in a legal way. There are different laws involving franchising in different areas of the country and having someone that is familiar with these laws will be a huge benefit to you.

When you first meet with a franchise lawyer or franchise consultant, one of the first things they usually ask is if you have setup your existing business as a separate corporation for the operation of the business and franchise system. Not only should you operate your existing business separately from your personal assets, you should also operate your franchise business separately from your primary business. This will protect your business from the franchise company. The separation is a good practice for franchise businesses and offers the owner a level of protection from legal and other issues related to the franchise business. A franchise attorney can assist you in the creation and setup of the separate corporate franchise entity.

First step: Register you franchise business name.

Apart from the corporate business setup, you need to first register your business and franchise name if you have not already done so. You need to make sure that you can use your business name in other areas of the country by registering the name as a federal or international trade mark. Often, the business owner neglects to both check for and register the business name as a national or international name and ends up in a sticky situation later when he/she runs into an area where the name is already a locally registered name. Or, worst case, someone sees what you are doing and registers the name before you do and then you will be out of luck and have to change the business name altogether. So if you don't to that now, doing it later can have some serious problems and legal issues to deal with. Obtaining a federal trademark registration for your business is an important and vital step in assuring that you have the right to use that name, as well as franchise it. A franchise is a name as well and you will be selling that name, you must make sure that you have the right to sell that name.

Registering a trademark business name is not all that difficult providing that no one else is using that name or word already. If someone has registered a similar name, you may also have a really hard time. For example, we all know McDonald's as a fast food franchise, but if you tried to register a MacDonald's as a fast food restaurant name and trademark you would have a battle on your hands. The name is too similar and won't pass. There are also several regulations around federal trademark names that you must comply with. You can't go a register a given name and generic term such as Frank's Pizza, there are just way too many Frank's out there do allow it. You also cannot have a description as a name, such as "Super Spicy" , that is not a name and will not get registered. If you have a registerable name, then you should have that name searched for other registrations of the same or similar names. This search should be done by a business or franchise lawyer who is familiar with the process and how to determine similar business names that you may have not thought of.

Next Step: Franchise Agreements

Once your franchise attorney has addresses your federal trademark registration and naming, you need to create and draft up a franchise agreement. This document needs to be a detailed document that your franchise lawyer needs to handle in the proper way. The franchise agreement is probably one of the most important documents you will have in your franchising selling business and it will cover many details. The purpose of the franchise agreement is to ensure the following items.

- Both the seller and buyer are protected
- Standard operating procedures of the business are defined
- Both parties have a clear understanding of their roles within the partnership of the franchise
- The agreement is fair for all parties
- Future problems can be anticipated and potential difficulties can resolved.

There are probably a few more that I missed, but generally the franchise agreement documents are for protection of all parties involved in many areas of business and franchise law. The franchise attorney will know the details and will have considered all the possibilities. This will include details on the franchise structure, training, support, franchise fees, franchise royalties, advertising, marketing, extra fees and costs, etc. Everything will need to be defined in the franchise agreement papers. A good test when you are looking to hire a franchise lawyer is to get a brief list of all the topics covered in the franchise agreements that they prepare, then compare that list to other attorneys and see which one covers the most areas.



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