What Is Franchising? Ask a Texas Franchise Attorney
Many people mistakenly believe that purchasing and operating a franchise is the quick, easy, sensible way to business ownership. However, there are many situations when purchasing a franchise does not make business sense. It is important to know what it takes to qualify as a franchise, the ramifications of qualifying as a franchise, and the consequences of qualifying as a franchise but not following applicable state and federal franchise laws.
Experienced and Reputable Texas Franchise Attorney
Texas franchise lawyer Kat Tidd has more than 25 years of experience working in the franchise industry and handles all aspects of domestic and international franchise law. She offers numerous articles for franchisors and franchisees so that they can become informed on various important franchise and transactional law issues. For further assistance, franchisors, franchisees and other entrepreneurs can contact the law firm to schedule a consultation with Kat Tidd.
Defining a Franchise
A business must follow a basic legal framework in order to be defined as a franchise. In general terms:
- Money is paid to another business owner to use his or her successful business model, marketing strategy and distribution process.
- The successful business owner provides training, significant assistance or control, a marketing plan or other elements of support or control to the new business owner.
- The businesses share brand identification.
Because the definition of a franchise is so broad, it is very easy for a business to qualify as a franchise — even when that is not the business owner’s objective. The checklist of factors is long and determining what is “significant” is a judgment call that is fact specific and calls for a careful and experienced assessment. As a result, many businesses qualify as a franchise without the business owners’ realization or understanding of the legal ramifications.
“Falling within the definition is easy. The consequences of doing it wrong or not following the rules are significant.” — Franchise law attorney Kat Tidd
Consequences of Qualifying as a Franchise
When a business falls within the definition of a franchise, there are certain legal consequences. Franchises are governed by state franchise laws as well as the Federal Trade Commission’s Franchise Rule (federal franchise laws). Franchisors and franchisees each have rights as well as critical obligations. Noncompliance with or violations of state or federal franchise laws could result in costly consequences.
Many online organizations claim they can provide quick, easy and inexpensive assistance with franchise startups. Unfortunately, in these situations, cheap services often result in a cheap product — documents that are prepared incorrectly and do not comply with state and federal franchising laws, and a firm that is not there for you years down the road to help you resolve legal problems arising from the ineffective documents. Hiring an experienced attorney to handle the franchise startup initially can help deter unnecessary legal costs to fix mistakes.
Instead of a Becoming a Franchisor or Franchisee, Are You Considering Business Opportunities?
If you are considering selling your successful business model for another business to operate under, or if you are contemplating starting up a business following another entrepreneur’s business model and strategy, first review these informative articles and then consult with an experienced Texas franchise law attorney:
- Is Franchising Right for You?
- Developing Your Identity
- Franchise Law: Keep it Simple
- Franchise Myths and Realities
Want More Franchise, Business Opportunity or Other Distribution-Related Information? Contact Lawyer Kat Tidd.
Addison and Dallas-Ft. Worth metroplex franchise law attorney Kat Tidd has the depth and breadth of knowledge and experience clients need. She can provide informative, straightforward advice and counsel, regardless of the stage of your business. She can also provide skilled assistance in transactional matters, ongoing compliance, dispute resolution and other legal matters.
To schedule your appointment with an experienced Texas franchise lawyer who can serve clients throughout the nation and abroad, please contact the Law Offices of Kat Tidd, P.C., online or call 972-247-6934.
Consultations are by appointment only.