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Word on The Street: Be Legally Ready for Franchise Opportunities in 2021

Franchise Business is Happening Amidst the Pandemic

By: Tom Spadea

There is so much hype in the franchising industry right now. Despite the ebbs and flows of a global pandemic and the stops and starts of an unpredictable election year, franchising experts agree that 2021 may be the biggest year for franchise sales in a decade. This kind of bump is attributed to a rise in an unemployed high-level workforce, low interest rates, increase in personal collateral and easier adaptability of system operations to “new normal” regulations than non-system or independent business models.

Soon-to-be franchisors and potential franchisees are lacing up to hit the ground running. Thanks to the Federal Trade Commission and Franchise Disclosure Document requirements, franchise transactions are fairly straightforward. It is crucial, however, to look at every deal through the eyes of a franchise attorney and confirm you are getting into the deal you think you are getting into. Even if you can’t change much of the fine print, before you invest your life savings and years of your life into a franchise, you need to be sure you fully understand it.

For business owners who are thinking of franchising their business, they also need to understand the legal requirements of launching a system. Don’t get caught by the too-good-to-be-true, low-cost consultant that isn’t giving you advice that is in your best interest. The first step is to secure a federal trademark for your business name and possibly your logo. If you don't have a federal TM, you should confirm your name can be trademarked and will be unique and independent enough to be protected nationally. Your trademarked name is the foundation that you will build your franchise system on. And even if you don’t franchise your business, in the interconnected world we live in, having a unique and protectable name that others can’t use is a building block to all long-term successful businesses.

The next step is to think about your franchise system through the eyes of prospective franchisees. What will you do? What will they do? And what will the economic relationship look like? Having an experienced and knowledgeable franchise consultant will help you lay out the business terms in a manner that will set your system up for success. Our job, as franchise lawyers, is to take those business decisions and integrate them into an enforceable franchise agreement.

The final step is to then prepare the Franchise Disclosure Document with your attorney who will integrate the terms and finalize the details of how the system will operate. One size does not fit all. A good consultant and attorney team can help you as a business owner understand the journey you are about to go on, and guide you to avoid the many pitfalls that take out most new franchisors in the first few years.

It’s a good time to launch a new brand or to buy a franchise, but the same rules and best practices still apply.  

Tom Spadea Certified Franchise Executive (CFE)
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