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
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Article De Nationale Franchise Gids: “Parliamentary questions asked about (false) self-employment franchisees” – dated 24 July 2019 – mr. M. Munnik
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Article Franchise+: “With our franchise formula you will earn mountains of gold.” dated 10 July 2019 – mr. AW Dolphin
The distinction between permissible promotions and misleading information remains a gray area, despite the relevant legislation.
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The District Court of East Brabant recently dealt with an important matter in preliminary relief proceedings in which a franchisee was completely involuntarily forced to adopt an alternative formula.
How do I keep my location? – June 6, 2019 – mr. K. Bastian
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Supermarket letter – 25
Supermarket Newsletter No. 25