Although franchisors and franchisees have differing interests, they both share the same goal of developing a successful franchise. Here are some recommendations for franchisors and franchisees to develop a fair relationship that protects both parties’ interests and optimizes their chance at success.

The Top 10 Franchise Attorneys’ Advice for Franchisors

Franchisors have some specific interests:

• Protect the brand: A franchisee that provides substandard goods or services to the public can erode a brand’s reputation and value.
• Establish a profitable relationship: A franchisor must make money from the franchise.
• Retain franchisee loyalty: Franchisees that feel unappreciated will underperform.
• Manage risk: A franchisor must manage its relationship with its franchisees and government regulators.

Best Practices for Franchisors

Some best practices for safeguarding these interests include:

• Create a manageable business model: The more restrictions and requirements you have, the more enforcement mechanisms you will need in your franchise agreement and the more resources you will devote to monitoring.
• Build a good franchise disclosure document (FDD) and franchise agreement: These documents are key to your relationship with governmental regulators and your franchisees. Spending time, money, and resources getting these documents right could save you from fines and lawsuits later.
• Create clear standards: Although you should avoid overdoing the restrictions and requirements, you will still need ways to monitor product and service quality. Make sure the standards set out in your franchise agreement are clear and enforceable.

The Top 10 Franchise Attorneys’ Advice for Franchisees

Franchisees also have interests to protect:

• Build a business: This interest aligns with the franchisor’s interest in protecting a brand since a strong brand can give a franchisee a jump start.
• Maintain compliance: A franchisee that breaches the franchise agreement risks termination.
• Manage risk: Franchisees must keep customers happy, so they do not complain to the franchisor about quality and place the franchise in jeopardy.

Best Practices for Franchisees

Some best practices for franchisees include:

• Read the FDD carefully: A compliant FDD contains a treasure trove of information about the franchise. Use the FDD to conduct due diligence by contacting existing franchisees so you know exactly what to expect.
• Follow the rules: The franchisor establishes rules to protect the brand. Following them helps you to build your franchise and avoid termination.
• Address concerns early: If concerns or disputes arise, document them immediately and raise them with the franchisor. Lawsuits often arise because of too little communication, not too much.

How to Start Implementing Best Practices

To implement best practices, you must take full advantage of your lawyer’s knowledge and experience. Speak candidly about what you want to do so the attorney can provide advice and counsel. Raise questions about what the attorney has drafted to reduce the chances of misunderstanding. Finally, when disputes arise, speak to your attorney before taking action to ensure you stand on solid legal ground.

Contact us to discuss best practices for your business, whether you are a franchisor or franchisee.