Reasons to read a franchise agreement before you sign

You’ve decided that you are going to open a franchise. You investigated each of the franchises you were considering and decided on the one that you feel is the best for your situation. Now, you have to work through the process of making your dream happen.

One of the things that you will have to do when you want to open a franchise is to sign the agreement. This is the backbone of your relationship with the franchise. You should read it and understand every point made in it before you sign on the dotted line. Here are some things you need to think about.

Pay attention to the musts and can’t

As you start to go over the paperwork, you will notice that there are a lot of points that touch on what you can do and what you can’t do. Pay close attention to these because if you don’t comply with them, you can lose your franchise.

The musts and the can’t are often standard points, such as you can’t work for a competitor or you must keep the trade secrets of the franchise. You might notice that there are also a host of other musts and can’t. These might include the requirement that you will remodel your business when the franchise says it must be done. You may be limited on what hours you are able to operate.

It might help you to make a list of the musts and don’ts when you are going over the agreement. This will give you something to refer to later. As an aside, consider jotting down the location in the agreement next to the item in case you need to refer to it later.

These agreements aren’t negotiable

Almost every franchise agreement is going to be non-negotiable. This might seem like it is a bit unfair, but you should realize that this is actually a sign of a healthy franchise. A franchise that is healthy is going to be willing to let potential franchisees walk away if they aren’t comfortable with the terms because they know that another franchisee who fits their needs will come around. A franchise that is willing to negotiate might be grasping at any franchisee that comes across. For this reason, think twice about a franchise that is willing to bend to your demands.

Ideally, you will have an attorney to review the agreement before you sign it. Having a second set of eyes on the agreement can help you to catch things that you might have missed in your reading of the agreement.

FindLaw Network