Franchising has come to the food truck industry. If you’re considering franchising your food truck, remember to do your homework regarding franchising legal issues. Franchising is governed by federal and state laws that require franchisors to provide prospective franchisees with information that describes the franchisor-franchisee relationship.
Starting a franchise may be a great way to become a food truck owner, without going through a lot of the growing pains that small business owners typically go through. However, franchising also has a lot of unique franchising legal issues that other food truck vendors don’t face. Don’t get stuck in a franchise agreement without knowing the facts.
Franchising Legal Issues That Can Be Easily Avoided
Use the following tips to avoid falling into franchising legal issues.
The Franchise Agreement
If you’re thinking about starting a food truck franchise, you should be aware of the many legal issues surrounding franchises.
- Get everything in writing. If you’re relying on any promises made by the franchisor or his or her sales personnel or brokers in making your franchise investment decision, get them in writing as part of the franchise agreement.
- Understand the agreement. If times get rough between you and your franchisor, that’s the language you’ll live with.
- Know Your rights. Never assume you have any rights not stated under the franchise agreement. If the franchisor hasn’t given you rights, then you’re likely not entitled to them.
- Be careful of what you guarantee. Often the guaranty you may be asked to sign will make you personally liable for past-due royalties and advertising fees. Some agreements also include damages resulting from an early termination of the franchise agreement.
- Know a franchisor’s rules if you own another business. You may own your own business as a franchisee, but you will need to follow many of the instructions of the franchisor even when you may not agree with them.
- Always consider your exit strategy. When the relationship is over, operating independently may not be an option if you’re bound by a post-termination non-competition agreement.
The Professionals You Work With
If you are new to franchising, it’s a good idea to hire an attorney to review the franchise agreement.
- Don’t do it yourself. Seek advice from lawyers and consultants who have experience in franchising. Avoid working with the franchise packaging firms that offer you a one-stop shop of services, which may include preparing your legal agreements, and make it seem that the process of becoming a franchise is simple and always successful. Franchising your food truck can be very successful if you work with professionals throughout the process.
- Know the difference between a broker, consultant or advisor. Many franchise brokers call themselves consultants or advisors. Find out whether the advisor you’re working with gets a commission from a franchisor for introducing you as a candidate for their franchise. Brokers work for the franchisor, not you.
The Bottom Line
A good relationship between the franchisor and franchisee is critical for the success of both parties. Franchising a food truck establishes a business relationship for years. Because of this, the foundation must be carefully built by having a clear understanding of the franchise program. Understand the franchising legal issues even if it’s intimidating. Find the advice of an experienced franchise attorney to help a prospective franchisee understand the legal issues and to protect them from making costly mistakes.
Disclaimer: This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice.