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Business & commercial law questions: What is a franchise?

Starting a business is a dream of many Ohio residents. However, the risks involved in doing so, along with the business & commercial law requirements of starting that business, can make many people shy away from it. Getting a new business off the ground requires a significant amount of work and patience and could take years to become profitable. For those who want more of a turnkey business that meets them half way, a franchise might be the ideal solution.

When most Ohio entrepreneurs think of franchises, images of McDonald's golden arches come to mind, and rightly so. The fast food industry has used franchising for decades in order to expand its locations and market. Now, numerous types of businesses use this business model.

Broken down into its simplest form, the owner of an advertising symbol, tradename or trademark (such as McDonald's) enters into a commercial and legal relationship with someone who wants to use the established identity to run a business. The franchisor (the owner of the business) provides the franchisee (the entrepreneur) with everything needed in order to open the business including site location, products or services and training, among other things. In many cases, there is an ongoing relationship between the two parties since the franchisor wants to maintain the reputation and identity already built. 

After making the decision to start a business through a franchise, a franchise agreement is ordinarily required. Before executing that agreement, however, many business & commercial law issues will need to be resolved -- not the least of which is reviewing the terms of the agreement. It would be beneficial for a franchisee to have an attorney review the agreement beforehand and help with any other legal issues may arise. Doing so will help ensure that the new business and the relationship with the franchisor get off to a good start.

Source: FindLaw, "Buying a Franchise: Overview", Accessed on Nov. 18, 2016

1 Comment

When dealing with franchise agreements I agree you are going to want a lawyer. If you don't follow protocol it can get messy. To make sure things go smoothly it is worth consulting a legal professional.

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