Buying a franchise. 9 Tips to consider before buying a franchiseApril 25, 2022
Oruga Group Business and Investment Law ► https://orugagroup.com/en
Hi there. Today’s video is about 9 tips to consider before buying a franchise in a foreign country.
1. You should know that you are not #buying the business system, you’re renting it. You’re simply acquiring the rights to use a franchisor’s business system, trademark and ‘know-how’ for 5 or ten years, depending on the term of the franchise and any renewal rights contained in the franchise agreement. Think of it like a lease.
2. Your franchise’s renewal and assignment rights are not automatic. Virtually all franchise agreements allow for the right to renew for at least one term, and permit the franchisee to assign the contract. But there are always conditions (and fees) that go along with the exercise of renewal and assignment rights. If you don’t meet those conditions, you wont be able to renew or assign.
3. Critically assess the #franchise contract and all financial information given to you. Be very careful with signing the franchise agreement.
4. Avoid entering a franchise agreement where both you and your family members have to guarantee the contract. It only means the franchisor has your family to sue if the business fails. If at all possible, limit your exposure so that only one of you assumes all the risk.
5. Trademarks. Does the franchisor own or control the trademark? If there is, it symbols that your franchise branding is a great one.
6. Pricing for products. What assurances are there that the products for sale by the franchisor can be bought by the franchisee at competitive prices? What if the products for sale have to be shipped from another part of the country, or another country? Have you factored in freight costs and duty?
7. If the franchisor is not a member of the country’s Franchise Association, ask ‘why not?’ Keep in mind you need a stable franchise to secure your investment.
8. Don’t let your expectations get away from you. Like any other investment, acquiring a franchise involves a high degree of risk. Some franchises work out very well. And some do not. Do not sell the concept to yourself. Be prepared to walk away.
9. Hire a local lawyer if you can to secure and protect your interest. Franchisors pay their lawyers lots of money to draft standard, solid and enforceable franchise agreements that they can use with all their franchisees with little or no amendments, so should you to hire a lawyer to review and negotiate the franchise contract on your behalf.
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ORUGA GROUP is a law firm and expert of foreign investments in Poland. We provide complex legal services of company registration in Poland and other EU countries.
Our main activities are practicing corporate law, providing investment services, offering legal advisory to investment in Europe.
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