Purchasing a franchise is a significant financial investment. With any significant investment, it is best to fully understand the terms, conditions, fees, and restrictions in the purchase.
This evaluation includes review of the Franchise Agreement and the Franchise Disclosure Document (also known as the FDD) with an Ohio Attorney. Most Franchisors will even recommend review by a Franchise Attorney.
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Franchise Agreement Terms
The Franchise Agreement will control the terms between the Franchisor and the Franchisee. Despite what may have been discussed or implied in previous discussions with the Franchisor, the terms in the Agreement to purchase the Franchise supersede prior negotiations.
The Franchise Agreement may also impose limitations on the Franchisee’s ability to contract with third parties, transfer ownership of the business, and advertise. This can include restrictions on purchasing supplies, limitations on the transfer of your business after death, and even creating a local Facebook or Google Plus page for your location. In most cases, the terms can be negotiated with the Franchisor.
Franchise Disclosure Document
Every Franchisor is required by the Federal Trade Commission to create a Franchise Disclosure Document. The FDD provides information about the business, past and present lawsuits, disclaimer of risk, and projections of profit. As a business owner, it is important to review the success and failure rate as well as any lawsuits by Franchisees against the Franchisor.
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