If you are looking to start a new business endeavor, you may be interested in exploring how franchising can help you achieve some of your goals. When implemented strategically and thoughtfully, franchising can bring many benefits, such as an efficient use of capital, accelerated growth, and risk mitigation. Whether you are considering franchising your business or entering into a franchise agreement as a franchisee, it’s important to take the time to understand Texas franchise laws and the steps you need to take to set yourself up for a smooth and successful franchise operation. If you rush through this critical process, you leave yourself vulnerable to unnecessary legal risks and other issues that could lead to significant and costly disputes in the future. As with any business decision, it’s important to assess the matter from multiple angles to identify potential issues and implement risk management strategies that allow you to proceed with greater clarity and confidence.
Seeking the guidance of a highly experienced and dedicated Texas business formation attorney is the best way for entrepreneurs to protect themselves and their investment. Together, you can articulate your business goals, examine the nuances of all applicable laws and regulations, and understand your rights and responsibilities when franchising your business. Let’s take a closer look at the Texas franchise law and why partnering with a qualified and knowledgeable Texas small business franchise lawyer is one of the best decisions you can make to ensure that your business enjoys a bright and successful future.
Overview of Franchise Law in Texas
While there are no Texas-specific franchise registration laws, entrepreneurs looking to franchise will need to understand how the Federal Franchise Rule and the Texas Business Opportunity Act affect this business decision. Essentially, the Federal Franchise Rule “requires franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise, its officers, and other franchisees.” Additionally, the Texas Business Opportunity Act allows franchisors to avoid broader registration requirements, provided that they meet the exemption criteria. One of the most important elements of any franchise endeavor is preparing and reviewing the Franchise Disclosure Document (FDD) according to the specific requirements set forth in the Federal Franchise Rule. Any business looking to franchise will need to familiarize themselves with these laws to ensure that they fulfill all the requirements and obligations as they move forward.
Key Provisions to Understand in Franchise Agreements
If you are a Texas entrepreneur who is looking to become a franchisee, you are entitled to receive and review the Franchise Disclosure Document (FDD) at least fourteen days before you sign the franchise agreement. This document contains critical information about the franchisor, such as its business and litigation history, financial reports, and other relevant details that will affect the operation of your franchise. While you may be tempted to sign the franchise agreement right away, it’s essential that you take the time to carefully review this document to fully understand your rights and obligations. Here are just a few of the key provisions that you can expect to see in a franchise agreement.
Territory Rights
The franchisor will outline the specific geographic area in which you as the franchisee will be permitted to operate. Many franchise agreements require the franchisee to get the franchisor’s approval before signing the commercial lease to ensure that the proposed location falls within the geographic area and is suitable for the brand’s standards.
Franchise Fees and Royalties
The franchise agreement should define all fees that the franchisee will be required to pay to the franchisor in order to operate the business. For instance, the agreement may include the initial franchise fee that must be paid at the time the franchise agreement is signed, as well as any upfront fees for inventory or required purchases. This document should also disclose ongoing fees that need to be paid to the franchisor, including but not limited to the royalty structure (i.e., the percentage of the location’s gross revenue or a flat amount paid at regular intervals), marketing and training requirements.
Term, Renewal, and Termination Rights
Franchise agreements also list the duration of the initial agreement and the conditions under which the agreement may be renewed. This document should address the circumstances and procedures under which the franchise agreement can be terminated. These sections are particularly important to review carefully, so it’s worth seeking the support of a skilled and experienced Texas business attorney for added security and protection.
Legal Obligations of the Franchisee
Included in the franchise agreement are the franchisee’s legal obligations. Generally speaking, franchisees must remain in compliance with the franchisor’s operational standards and brand integrity, conduct regular reporting and audits, and adhere to the franchisor’s marketing requirements. Your knowledgeable Texas business lawyer can help you review these terms to ensure that you fully understand your obligations as a franchisee.
Learn More About Buying a Franchise in Texas Today
The prospect of purchasing a franchise in Texas can be exhilarating, and it’s understandable that you would want to get started as soon as possible. However, meticulous franchise agreement review in Texas is essential to ensure that you can operate your business with confidence and success. Having an experienced Texas franchise lawyer review your agreement can help to identify any red flags that need to be addressed, while ensuring that the steps you both take will remain in compliance with federal and state laws. Moreover, a skilled legal advocate can help to negotiate key terms of the franchise agreement in order to safeguard your best interests and minimize potential disputes later on. If you are asking the question, “Who is the best franchise attorney near me,” then reach out to Sewell Sewell Beard LLC right away to get started.
At Sewell Sewell Beard LLC, we believe in treating every client we serve with the attention and care they deserve. We’re ready to help your business navigate franchise agreements and make informed decisions that will protect your best interests and support a bright future. Please get in touch with our Prosper, Texas office at (972) 777-5390 to speak with a highly qualified and trusted business formation attorney.