The Sequined Blazer

The Sequined Blazer

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Should You Sign Your Franchise Agreement?

February 26, 2014 | Comment

michigan-franchisee-representationThe decision to purchase a franchise brings with it both danger and opportunity. Both exist at the same time and need to be evaluated by reviewing the facts unclouded by hopes or unreasonable anxiety. An excited buyer of franchise is so focused on the profitability of the franchise and many times minimize the risk. According to, it is important to consider all the aspects of the agreement before putting your name on the dotted line. Franchising agreements are complicated because the type of business you purchase, the limitations on how you run the business and how you pay for the business is complicated and requires much detail. Sadly, most agreements are in plain English.

“Buyer beware” has real meaning when considering a franchise. No matter how nice the seller, it is your responsibility as the potential business owner to understand each parties obligations under the agreement: What will the seller do and what do you have to do. This is not rocket science. Franchises have been bought and sold with great success. You have to remember that no matter what is said during the sales process, if it is not in the agreement it does not exist.

A good rule to follow is that if it is not plain to you or if you can not find it in the agreement, then the language is not plain enough. The danger is in not only what you know you do not know, but also in what you do not know you do not know. However, buyers are consistently surprised that the business they thought they were buying is not the business they bought. It is better to get any bad news before you are committed. There is no interest in having to seek relief from a court if you can avoid the issues before you sign the final draft of the agreement. Buyers are alerted to the fact that there is an opportunity to take the time to have the agreements reviewed by the buyer’s own legal and accounting professionals. There is a good reason for sellers having the language in the agreement. It is to make clear that the buyer has the final responsibility to understand all aspects of the transaction. Failure to take advantage of the opportunity is a serious mistake.

A significant part of the business you are buying is the business plan that is to be the road map to the profits. You should take every opportunity to make sure you can execute the business plan. The plan is a major part of the agreement you are being asked to sign.

It is always advisable to have someone representing your interest and who is knowledgeable about franchises to review the document. If the document is as clear as you believe then you paid someone to reassure you that you have good judgment. If it turns out to be less than clear, you want an early warning system. You need all of the facts to make an informed business decision. Avoid the trap of reading the document the way you want it to mean rather than confront the actual meaning and application of all of the terms and conditions. Your legal and accounting professional can help you expect the unexpected and give you a better chance at success.

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