A franchise can give you an excellent opportunity to go into business even if you have limited resources or experience. However, you need to consult a franchise lawyer to guide you through the process of purchasing a franchise. Below are some pitfalls that the lawyer will guard you against.
Liquidated Damages Clause
You should scrutinise the franchise agreement carefully to find out what will happen in case the business does not survive for the entire duration of the contract. Some franchise sellers include a liquidation damages clause that compels the person who had bought the business to give the seller a predetermined sum of money in case the business fails during the contract period. Do you see how unfair this can be? You are expected to pay the franchise owner money at a time when you can no longer run the business because it is hardly making any profits. Avoid franchises with such clauses. Instead, opt for franchises where the seller is given a right to buy back the business should you fail to run it profitably within the contract period.
Intellectual Property Issues
It is also important for your franchise lawyer to read the contract and confirm what happens in case any aspect of the franchise violates the copyrights of an individual or business in your area of operation. Refrain from buying the franchise in case it puts the liability for such issues on you alone. Otherwise, you may end up being compelled to pay damages in case someone sues the franchise for IP violations.
Mandatory Arbitration Provisions
It may also be unwise for you to buy a franchise if its contract states that any disputes that arise will only be resolved through arbitration. Why is this a potentially bad provision? The chances are high that the individual undertaken to facilitate this process might be sympathetic to them. Consequently, it may be harder for you to get justice if all your conflicts have to be settled by the entity. The franchise lawyer will ensure you sign an agreement that gives you the right to seek legal redress in case a dispute arises between you and the franchise seller.
Several other considerations, such as the financial aspects of the franchise, have to be considered before you sign the purchase agreement. Always involve a lawyer so that you can have a professional to examine all the paperwork submitted to you about the franchise.