Starting a Franchise Business? Don’t Forget to Review These Documents

Documents and Notebooks on Wooden Table
March 25, 2019
65 / 100

Starting a new business can be a major undertaking. This is even truer when that new businesses is a franchise. Starting a new franchise business has many benefits but usually requires a significant initial cash investment, so proper due diligence should be undertaken. Such due diligence can involve a lot of legal paperwork, making it prudent to have legal assistance during this stage.

Non-Disclosure Agreements and Employee Agreements

Non-disclosure and employee agreements provide valuable protections for a business and its valuable human capital as well. Non-disclosure agreements help protect those business secrets that can be an essential asset to any business’ operations as well as its bottom line. The Coca-Cola Corporation famously hides its secret recipe for Coke. This is the type of protected business information that a non-disclosure agreement can help protect.

Employee agreements can provide bilateral protections, addressing points of concern for the employer as well as the employee. Things such as health benefits, code of conduct, and salary are amongst some of the general parameters that an employee agreement may cover.

Source: https://blog.pandadoc.com/ten-things-to-include-in-an-employee-contract/

Both of these documents are legally binding contracts and can have important terms which might impact how a franchise operates on a daily basis. Sometimes, these documents can be complex and full of legalese. Therefore, it is a good measure to have an attorney help review these documents before entering into a franchise agreement.

Organizational Structure and Associated Documents

Another important consideration when deciding whether to start a franchise business is the organizational structure of this new or existing business. Chances are that it is not the simplified sole proprietorship or partnership organizational structure. Due to the complexity and sophistication of a franchisor-franchisee relationship, the proposed new franchise business is likely to have a more complex organizational structure, like that of a corporation or a hybrid entity (i.e., a limited liability company (LLC), limited partnership (LP) or professional corporation (PC)).

The organizational structure of the franchise can have major implications on various aspects of the business. For example, the organizational structure may be optimized for tax and/or liability minimization. However, the franchise agreement may require something different from what may be optimal for the potential new franchisee. Legal assistance may be required in these instances, as well as for thorough review of operating agreements or bylaws involved, in order to help the new franchise business get up and operating on the best foot possible.

Source: https://online.pointpark.edu/business/types-of-organizational-structures/

Franchise Disclosure Document (FDD)

Another important and legally dense document to consider when exploring starting a franchise business is the franchise disclosure document (FDD). The FDD is an important document to review before entering into any franchising agreement. All franchisors are required by the Federal Trade Commission to provide a copy of their current FDD to every applicant no less than 14 days before the sale of the franchise. The FDD contains 23 mandatory sections that provide candidates with information regarding costs and fees, legal issues, turnover rates, and more.

Source: https://www.franchisegator.com/articles/the-importance-of-the-fdd-11046/

Tax Returns

Tax returns are legal documents that can greatly assist a potential franchisee in examining a new franchise business. These returns give a great financial look into the operational history of an existing franchise business. Tax returns are legal documents because they actually require the filer to affirm that the information is true and correct as filed. Any potential franchisee should take it as a red flag if a current business owner is unwilling to provide the business’ tax documents for the previous five to 10 years. This, too, is another area where an experienced business attorney can provide insightful help. Such help can save a potential franchisee from a lot of pain and suffering in the long run.

Source: https://www.patriotsoftware.com/accounting/training/blog/how-file-small-business-tax-return/

Deciding whether to start a new franchise business can be an exciting time for any individual or group. However, due diligence has to be conducted in order to properly evaluate any new business opportunity. The old saying is that a good lawyer is worth their weight in gold, and a good lawyer should be engaged to help you navigate through the franchising process.

Categories

More Posts:

How to Avoid Tax Trouble at Your Business

As a business owner, you know how important it is to stay on top of your finances and taxes. But if you don’t have the knowledge or resources to do it yourself, getting help can be the best way to make sure everything is handled properly.  Here’s an overview of some...

Nyago Michael Emmanuel

We invite many people who can invest in our Akiba Ya umoja community benefit savings and investment group of Uganda to enable us expand our operations in Uganda

How Startups Can Ensure Health and Safety at the Workplace

Everyone, including the owners, management, and staff, is responsible for ensuring workplace safety. All parties must take the proper steps so that no one is harmed while working. If you are looking for ways to keep your workplace safe, here are ten tips to help you out.

How to Put Safety First at Your Business

As a business owner, it is your responsibility to provide a safe environment for both your employees and your customers. When you take the proper steps, you can prevent accidents, injuries, and even lawsuits. You need to make safety a top priority at your business. ...

Supplies Your Business Should Donate to Schools

Back-to-school season is upon us, and that means it's time for businesses to start thinking about donating supplies to schools. Donating supplies is a great way to give back to the community, and it can also be a great marketing tool for your business.  Here are a few...

Why You Need to Be Specific When Writing a Will

No one likes to think about death, but it is something that we all have to face at some point in our lives. If you have children, it is especially important to make a will so that you can ensure that they are taken care of after you're gone.  These are a few reasons...

How to Decide Which Business Data to Archive

When it comes to business data, it's not a question of if you should archive it, but rather how you should archive it. With so many factors to consider — from the costs of storage to the ease of retrieval — it can be tough to know where to start. In this blog post,...

A Five-Step Guide to Starting a Logistics Company

If you've been considering launching a transportation and logistics company, now is the moment. The transportation and storage sector is very important and profitable. Statistics show that by 2027, the global logistics market would have grown from its 2017 valuation...

Which technology should businesses invest in?

Introduction The top three IT firms this month are Fair Issac Corp., Enphase Energy Inc., and Arrow Electronics Inc. With outstanding third-quarter sales records in a struggling electronics industry, semiconductor distributor Arrow Electronics has become a top bargain...

13 Best tech business ideas to start this year

Technology companies are concerned with the research and development of technology-based goods as well as their distribution. The products and services that technology companies provide are applicable in a variety of different markets. The following is a list of the...
How to Avoid Tax Trouble at Your Business

How to Avoid Tax Trouble at Your Business

As a business owner, you know how important it is to stay on top of your finances and taxes. But if you don’t have the knowledge or resources to do it yourself, getting help can be the best way to make sure everything is handled properly.  Here’s an overview of some...

Nyago Michael Emmanuel

Nyago Michael Emmanuel

We invite many people who can invest in our Akiba Ya umoja community benefit savings and investment group of Uganda to enable us expand our operations in Uganda

How to Put Safety First at Your Business

How to Put Safety First at Your Business

As a business owner, it is your responsibility to provide a safe environment for both your employees and your customers. When you take the proper steps, you can prevent accidents, injuries, and even lawsuits. You need to make safety a top priority at your business. ...

All Categories

Business Operations

Entrepreneur Interviews

Marketing, Networking, & Social Media

Self Care & Personal Development

Working Moms

Business Software and Technology

Entrepreneurship & Small Business

Organizing Tips

Sales

Career Building

Family Businesses

Inspiration

Starting Your Own Business

Work-Life Balance

Communication

Hiring Help

Management & Leadership

Time Management & Priorities

Women in Leadership

Recent Posts

How to Avoid Tax Trouble at Your Business

How to Avoid Tax Trouble at Your Business

As a business owner, you know how important it is to stay on top of your finances and taxes. But if you don’t have the knowledge or resources to do it yourself, getting help can be the best way to make sure everything is handled properly.  Here’s an overview of some...

What to Do When Your Vehicle Lease Comes to an End

What to Do When Your Vehicle Lease Comes to an End

As your vehicle lease reaches the end of its term, you are presented with three options: return the car to the dealership, sell the lease or buy it outright. Each choice obviously has benefits and drawbacks that must be weighed before making a decision. In this...

The Power of Women-Owned Small Businesses

The Power of Women-Owned Small Businesses

     Women-owned small businesses are on the rise, and their impact is undeniable. In fact, in 2019 alone, women-owned nearly 12 million businesses that employed nearly 9 million people and generated over $1.9 trillion in revenue. From retail to technology to finance,...

Nyago Michael Emmanuel

Nyago Michael Emmanuel

We invite many people who can invest in our Akiba Ya umoja community benefit savings and investment group of Uganda to enable us expand our operations in Uganda

Soe Tun: The Copy Doctor

Soe Tun: The Copy Doctor

Autistic kid finds out that he’s unemployable and doesn’t enjoy most social settings. Decides to be a pro copywriter as a result.

Annie Anderson – Business Strategist & WordPress Creator

Annie Anderson – Business Strategist & WordPress Creator

Annie Anderson is the owner and digital creator at Midnight Rebel Digital Co. With over 25 years experience in design and development and more than 15 years experience with WordPress, Annie is a great person to have in your corner when it comes to websites, tech, and systems.