A franchise is the right to conduct business under the name of an existing trademark or company. Established companies license their business ideas and products and allow other entrepreneurs to market the trademark to others.
Franchise laws help protect the rights of franchisors and the individual business owners (franchisees) who rely on their trademarks for success.
Franchises are subject to state and federal disclosure laws. These laws require franchisors to reveal information about their trademark such as financial data and complaints against the company.
According to the Federal Trade Commission, the “franchise disclosure document ” must include “background information on the franchisor, the costs of entering into the business, the legal obligations of the franchisor and the franchisee, statistics on franchised and company-owned outlets, and audited financial information.”
Some states require a franchise to be registered before it can conduct business in the state. This means that franchisors must register and file their franchise disclosure documents with the appropriate governing authority such as the Corporation’s Commission or Secretary of State.
Franchise attorneys assist investors, franchisors and franchisees in making decisions that support running a profitable franchise. Franchise lawyers are experienced in recognizing misrepresentations or misleading information in disclosure documents.
Before investing in a franchise opportunity, it is wise to consult with a knowledgeable professional who will work to protect your rights.