You`ve probably decided to franchise your business to expand your market. And as franchisees open new outposts of your business, they need to find new locations. One of the keys to commercial success is to ensure that there is a demand for the products or services offered by your company, and if too many of your franchises come into the same field, each of their sales will suffer. Several states have also passed franchise laws, and definitions may contain certain relationships that do not comply with the FTC franchise rule. As a franchisee, you must keep accurate records and submit regular financial and operational reports. Since royalties often represent a percentage of gross sales, it is particularly important to report accurate sales figures. The franchisor generally has the right to request additional information, including tax returns, and verify your records. You may also charge an audit fee. Territories are important to limit market saturation.
A single franchise will find it more difficult to compete in oversaturated territory. Remember your significant investment in opportunity. How would you like you to have paid hundreds of thousands of dollars to open a franchise, just to find out that the franchisor allows another franchise just a quarter of a kilometre away? The agreement defines the obligation for the franchisor to provide training and assistance services. This obligation applies both before the opening and for the duration of the franchise agreement. Whether it`s a restaurant, a DIY store or a hair salon, opening a franchise of an existing business cuts off much of the foundation needed to successfully launch a new business. In exchange for a tax, you have the right to use selected trademarks from an already known entity, which greatly reduces your efforts to increase brand awareness. You will also receive marketing materials, an operating manual or both, which will provide you with formulas and processes that have already proven their worth in the marketplace. Within your franchise agreement, some of the material legal rights and obligations that are defined: Subway is an example where much has been written about the oversaturation of the market and its negative effects on franchisees. The agreement sets out all the conditions for an early termination. As a general rule, the franchisor has the greatest right of termination.
Franchisees often do not have contractual rights to terminate prematurely. A problem that very often arises depends on whether franchise agreements are negotiable or not. The answer is that they are negotiable, provided that the negotiated amendments are based on a request from the franchisee and offer the franchisee more favourable, but no less favourable, terms and rights.