A franchise is a business opportunity acquired by one person, called a franchisee, in exchange for a fee paid to another person, the franchisor. The business opportunity may include a business plan, marketing strategies, training, advertising and/or an inventory supply structure. Before selling a franchise, a franchisor must register with the State where the business will be operated and provide the franchisee with certain information, called a circular.
Haley Palmersheim, S.C. is experienced in franchise law and a franchise attorney can assist in drafting and filing the necessary registration materials on behalf of a franchisor, as well as reviewing those materials for the benefit of a franchisee. Because the fees paid to a franchisor can run in the tens of thousands of dollars, it is important to always have a franchise attorney review those documents before signing any contract.
While the circulars must be filed with the Department of Financial Institutions, they are not reviewed for compliance with the law. It is vital for the franchisor to make sure its circular complies with the disclosure requirements, to avoid later claims by franchisees that may require repayment of all franchise fees and royalties paid by the franchise.
Having a franchise attorney review the offering before signing the contract is equally important for the potential franchisee. Some websites describe franchising as "a risk-free way of investment." Nothing could be further from the truth. Entering a franchise has many benefits, but will also likely tie your business to the franchisor for years to come through the payment of royalties and other fees, and limit your ability to grow your business in the way you would like. Being informed about franchise law, and the risks and benefits of franchising before you enter into a franchise arrangement is simply good business practice.
A Haley Palmersheim franchise attorney can help you better understand franchise law and draft necessary franchise agreements. Whether you are a franchisor or a franchisee, contact us at our Madison, Wisconsin office by calling (608) 836-6400 before you take the first step into franchise.