Los Angeles, CA (Law Firm Newswire) December 28, 2010 – For those with a successful business, franchising can be a good way to expand quickly and perhaps stay ahead of the competition.
After all, franchising brings little risk to the franchisor as the franchisee is the one putting up his or her capital when opening a new unit.
What is a franchise?
Franchising is the selling of a particular business model and method.
“The franchisee will pay an upfront fee for the right to use a name and/or trademark to open a business and to receive the proper training,” said Anthony Spotora, a Los Angeles business lawyer. “Often, the franchisee will also pay an ongoing percentage of sales to maintain its rights and keep receiving assistance in various areas such as advertising, marketing and operational management.”
Franchising a business has many pros, but it is important to undertake such an endeavor only after careful thought. Business owners put their hearts and souls into their businesses and often believe wholeheartedly in what they are offering to the public, but the reality is that the franchise model is simply not right for every business.
Things to Consider Before Taking the Plunge:
-Can this concept or product survive in other markets? What is a success in one region may be a failure in another. While the franchisee is the one taking the financial risk, poor performance can obviously have a negative impact on a name or brand.
-Will others want to buy this concept? Can others see the value in this particular model and method of doing business?
-Is there a manual of operation? Investors need to see that there is a method for running the business and an explanation of how they will receive training in the opening and operation of the business.
-Is there a prototype or a proven record of performance? Investors are more likely to believe in a concept or product that has a track record of success rather than one that has yet to get off the ground.
“Franchising is regulated by state and federal law. It is important to stay abreast of those rules and regulations. Those who do not follow them could end up seeing large fines or felony convictions,” Spotora said.
For those thinking about franchising a business, it is important to speak with an experienced business attorney.
Law Offices of Spotora & Associates, P.C.
1801 Century Park East, 24th Floor
Los Angeles, California 90067-2302
Call: (310) 556.9641