Possible pitfalls of a starting franchisee
Starting a business on the basis of “franchising” is in. This is not surprising, after all, as a starting entrepreneur, it certainly has a number of advantages to operate a company under a proven franchise concept. Below are seven points that, in my opinion, the aspiring franchisee should in any case take into account before working with a franchisor.
1. Is there a proven franchise concept? In other words, has the formula indeed proven itself in practice? If there is only a starting concept of a few months old, with a limited number of franchisees participating, the starting franchisee should be wary. In situations like this, I usually advise aspiring franchisees to have some solid conversations with potential fellow franchisees. This can be very enlightening.
2. Has proper – independent – market research been carried out from which it follows that the operation of the company is financially viable in the future? This is a very important point. If the franchisor, when asked, is not prepared to have such an investigation carried out at its expense, a healthy dose of suspicion is in order. In fact, in my view, a franchisee should not start without such an investigation. After all, the franchisee must have (some) insight into the expected results. In addition, the franchisee can hold the franchisor to account – if the results during the course of the journey are disappointing – the franchisor about the results of the market research.
3. It is also important that the franchise agreement includes the obligations of both the franchisor and the franchisee. There must be a balanced franchise agreement. Is the franchisor willing to take any suggestions from the franchisee into account, or is it “take it or leave it”? In short, the franchisee must be prevented from entering into a strangling contract, which only includes obligations for the franchisee.
Ludwig & Van Dam franchise attorneys, franchise legal advice
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Other messages
Mandatory franchise council?
Not in all cases does the franchise agreement contain a reference to the franchise council or a comparable body.
Unauthorized Dispute Resolutions Within Franchise Organizations
Franchise agreements occasionally contain dispute resolutions that grant powers to the franchisee(s), the franchise council and/or a franchise association.
Fictional employment issues
A permanent point of attention in franchise relationships should at all times be the question of whether in the franchise relationship
(Im)decent behaviour
In practice, situations occur in which a franchisor is confronted with behaviour
Guarantee schemes for franchisees
Franchise agreements often stipulate that franchisees mutually guarantee guarantees for various products.
Arbitration: advantage or disadvantage?
Franchise agreements often include a dispute settlement procedure that pertains to the manner in which the parties involved in the franchise agreement deal with a possible dispute.