If you are considering starting a Florida business as a franchisee, you have probably already done some research regarding the basics. Florida defines a franchise as an arrangement in which a franchisee has the power to promote and sell goods produced by another company, the franchisor. Pursuant to a franchise agreement and in exchange for fees, the franchisee will also gain the benefit of the franchisor’s logo, business model, and marketing efforts.
However, beyond this basic description, there are many additional details and nuances involved with Florida franchise laws. It is understandable that you need customized legal advice, so you can rely on a Clearwater business litigation lawyer to provide details based upon your specific needs. Some answers to common questions about franchises may also be helpful.
What are the different types of franchise arrangements?
The specifics will vary based upon the franchisor’s operations and requirements, but franchises typically operate according to a designed structure. Options include:
- Business Format: In this franchise arrangement, the franchisee operates using the trade name, logo, and general practices of the franchisor.
- Manufacturing Franchises: The franchisor may release all ingredients, formulas, procedures, and other essentials of the manufacturing process to the franchisee. With these tools, the franchisee can then produce the item for sale.
- Distributorship: Through this relationship, the franchisor produces a good, then provides it to the franchisee for distribution to the end user.
How does a typical franchise agreement work?
The contract between the franchisor and franchisee will contain the key terms about the relationship and the obligations of the parties. It will also define the financial arrangements, since a franchisee will typically be required to pay royalties on sales, training expenses, and other fees to the franchisor. The franchise agreement may also cover:
- Software licenses;
- Non-competition, non-disclosure, and confidentiality clauses; and
- Guarantees regarding performance of the franchise.
Note that a franchisee will also be party to many third-party contracts in operating a franchise, such as loans, leases, and vendor agreements.
What is a franchise disclosure document?
Florida law requires franchisors to provide a substantial amount of information about the business, so the franchisee can make informed decisions before investing. The franchise disclosure document should include:
- Details about operating the business;
- A list of current franchisees;
- Litigation history and pending cases;
- Initial investment and ongoing costs;
- Marketing and promotions; and
- Termination policies.
Franchisees take on considerable risk in operating the business and they rely on the statements made in the franchise disclosure document. Therefore, you have options in the event that the franchisor made misrepresentations to induce you to sign on.
A Pinellas County, FL Business Litigation Attorney Can Provide Additional Answers
Hopefully, these answers to FAQs about franchise laws provides insight on the basics. Still, you will need more comprehensive information and skilled legal representation when starting up and operating a business as a franchisee. For more information, please call Clearwater Business Law at (727) 785-5100 to speak to set up a consultation with one of our business law attorneys. After reviewing your circumstances, we can advise you on your options and contractual rights under a franchise agreement.