Franchise Regulations

The regulations that govern franchising at the national and regional levels are referred to as franchise regulations. These regulations vary from nation to nation.

Some nations, such as the United States, have well-developed franchise regulations. In others like India, government regulation of franchising is still in its early days. In various nations, there is a self-regulatory aspect to franchising, with franchisors taking the initiative to formulate and follow specific standards. In these contexts, the franchisors are not necessarily subject to any penalties should they fail to comply with these standards.

If you are looking to become a franchisor, you should find out which regulations govern franchising in your location. Remember that, if there are franchise regulations, they are likely to exist at both the national and regional levels. Violating these regulations will earn you penalties, a terrible risk to take when your credibility is essential to successfully marketing your franchise to prospective franchisees. Hence you must make the effort to find out what the regulations pertaining to your business are and to comply with them. You could do this the hard way: this entails doing all the research and completing all the forms. You could also do it the easy way: by hiring a franchise lawyer.

 

Why Do Franchise Regulations Exist?

 

Franchise regulations primarily exist to protect franchisees. If franchisors were allowed free rein, it is likely that some individuals would take advantage of the opportunity to commit fraud. They might franchise a business that they were aware had no capacity to succeed, and sell unsuspecting men and women the franchise. It would probably be too late for these men and women to seek redress by the time they realized that they were on a sinking ship.

Having regulations in place minimizes the likelihood of such an outcome. With regulations to contend with, franchisors have to disclose all the relevant information pertaining to their businesses before they enlist a single franchisee. This is typically information about the franchisors’ and businesses’ financial histories. Such information would make it possible to determine the legitimacy of the franchisors and their businesses.

Examples of this kind of information include previous earnings and projected earnings, along with documentation supporting those details. Information about trademarks associated with the business should be made available, as should any aliases by which the franchisor has gone. The franchisor’s prior entanglements in fraud, if any, should be indicated.

Note that franchise law sometimes overlaps with other areas of law, including commercial law and intellectual property law. This can make things complicated for the franchisor. As a prospective franchisor, you should make a point of consulting a franchise lawyer to deal with all such legal matters.

Franchise regulations are inescapable as they are part of every aspect of the franchising process but you can use that to your advantage.

There is no getting around franchise regulations when you get started on your plan to franchise your company.  It seems that lawmakers and politicians have worked weekends to come up with franchise regulations that can get their noses into just about every aspect of the franchising process from the opening phone call to the celebration cocktail party when the deal is done.

It isn’t like there was not already a lot of hard work to be done to get your company gets ready to launch into the huge change that will come when you begin to sell franchises of your successful business.  Of course, you already knew that much of the process of bringing new raw recruit franchise owners on board was going to mean some communications would have to happen.  Franchise regulations are just there to make sure that for every franchise arrangement, those documents that get presented to the franchise applicants are standardized and that there are no details left out of any of them.

Franchise regulations kick in from the earliest stages of setting up a franchise arrangement.  Franchise regulations get almost ridiculously detailed about what will go into your franchise disclosure documents,  your franchise agreements and your franchise operations manuals.  It is easy to get a little ticked off about how much franchise regulations hog the center stage for a project that should belong to you.  But instead of seeing franchise regulations as a big pain in the neck, look on them as an opportunity.

Putting some spin on franchise regulations

Franchise regulations are far more interested in protecting the new franchise owner than in being a tool to make the franchising company feel happy inside. In a way, you can see why this makes sense in that the rookie franchise investor could be open to a scam or two if they are not dealing with a good clean franchisor like you.  So use that bias toward the franchisee in the franchise regulations to your advantage.

Pile up plenty of good old marketing language in the cover letters to your cover letters for franchise documents making sure the franchisee is informed loudly that these complicated documents are that way because franchise regulations are there to protect the little guy. That spin is not there to fool anyone. Instead it is there to make sure you use those scary and intimidating documents as tools to assure the timid future franchise owner that franchise regulators are their best friend and that you are too.

Also do not try to keep the franchisee from using a franchise lawyer to make sure the franchise documents live up to every comma and semicolon of franchise regulations. If anything encourage them to retain their own franchise lawyers.  By sending that message that “we are in this together”, you use franchise regulations to cement that love affair with your future franchise owner. It is a love affair that will result in lots of success and piles of money in your bank account and for the franchise owner too.  So spin away because it is good for everyone involved in this big adventure of franchising your business.

 

 

There are a huge number of franchise regulations on the books but most of them are there to protect the franchisor.

Franchise regulations are an important part of what you must go through to buy a franchise and achieve your dream of great wealth as a small business person. It is easy to look at the huge volume of franchise law and think that, once again, the government is sticking their nose in somewhere that they do not belong. In reality, however, most franchise regulations are put in place not to protect the franchisee but to protect you as you work through the process of buying a franchise and getting that dream business that you have always wanted.

As you work interact with the company offering you a franchise, you will see what seems like volcano flow of franchise documents come your way.  Many of those documents are filling up your mailbox because franchise regulations require that a lot of disclosure happens before you fork over your hard earned money to buy a franchise and set up shop.

Disclosure is a seventy five cent word that simply means that the franchisee must inform you about everything that will happen as the franchising process takes place. Disclosure is also part of franchise regulations because they are required that you know about any and all requirements that you will have to live up to as a franchise owner.  You also have a right to know about what you can expect and demand of the franchising company so they hold up their end of the bargain too.

Understanding the distinctions between state and federal franchise regulations is important.

If things were not messy enough, there are different levels of franchise regulations to be aware of. Before you sign any franchise agreements, it pays to know where state level franchise regulations are in place and where the federal government steps in to add their two cents worth.

One reason to be alert about the different levels of franchise regulations is that if you run into a problem down the road and the franchisee is in another state. If that happens, there could be confusion on how responsible that company is to regulations that pertain to the state where you live. So it is smart to be aware of these distinctions and look for how they might impact the franchise agreements and other documents that you are reviewing as you prepare to buy a franchise and get moving on your exciting new business.

You should not hesitate to get some help form a qualified franchise lawyer or franchise consultant to sort the various franchise regulations out for you.  By engaging someone local, they will be well aware of the state franchise laws.  Your franchise gurus can also interact with the franchise legal brains at the franchising company to make sure they lay out the details of who is responsible for what. Then you can feel confident that you are going into this deal with someone watching your back.