Taylor Legal Blog

Three Important Things to Know if Thinking About Purchasing a Franchise [VIDEO]

Posted by Katherine L. Taylor, Attorney and CPA, Chief Problem SolverSep 22, 20230 Comments

{2 minutes to read}  Are you a future business owner or even a current business owner looking to purchase a franchise? I'm Katherine Taylor, the lawyer for business owners, and I recommend three items that you should initially look for when you start down the road to eventually purchasing a franchise. 

The first thing I would like you to do is confirm that the franchisor — the company selling the franchise to you, who will be a franchisee — is licensed or registered in your state. Not all states require registration, but many do, so, number one, check to see if your state is one of them, and if so, make sure that the franchisor is registered. Even if your state doesn't require registration, it's a good idea to determine whether the franchisor registered in other states where it does business. 

Secondly, you will receive an extremely long document called a Franchise Disclosure Document (FDD) from the franchisor. Please have a lawyer review the FDD document and the associated Franchise Agreement you will eventually have to sign. The FDD can sometimes be 100 to 200 pages and is very daunting. Within those 100 or 200 pages are what I call traps. It's crucial to have somebody who has reviewed a lot of these documents look it over to point out those traps. 

Next, consider that if you purchase a franchise, this will not be your own business. The franchisor is essentially going to be your business partner. I point this out because the Franchise Agreement you sign will have many conditions, obligations, and contingencies, giving the franchisor much control over your business. When all is said and done, if you are comfortable with that, then by all means, proceed down that path. 

If you need a Franchise Disclosure Document reviewed in Maryland, contact us. I look forward to speaking with you.