When you are investigating a franchise opportunity, make sure that you check out the litigation history of the company. The whole litigation history of the company will be listed in the UFOC that a franchisor is bound to give you minimum 10 days before you decide to buy a franchise from it. Moreover, ensure you have your franchise attorney with you when you go through the legal history of the company. The document will include litigation history of the franchisor as well as its executives in charge of offering franchise business for sale. It will also make you aware whether the company or the executives have been convicted of felony charges such as fraud or violation of franchise law or unfair trade practices.
The UFOC may also include any state or federal injunction they have been given concerning such misconducts. Besides felony actions, any civil suites that the franchisor or its executives have faced or are facing at the moment will also be included in the document. The civil suites have to be in connection with the franchise business. It can also include the personal bankruptcy the executives might have faced. That will help you to understand the financial stability of the company. Now the next thing you are supposed to check out is that how many franchisees have complained against the franchisor. If the number is quite low, then there’s nothing to worry about. But if people are complaining against the franchisor on a regular basis, then it’s definitely a matter of concern.
More damning is the cases where a number of franchisees have joined hands to complain against the franchisor. If so many of them found something common to complain about, then there must be major problem with the franchisor. If the cases are still pending, ask your franchise attorney to check them out whereas if they are settled, then you can look into the court verdict. In case the company has settled the case outside the court, then you can ask for the settlement terms. If the franchisor is not willing dig around, then ask the former franchisees why they had a dispute. Many times, franchisors have such clauses in the franchise agreement that take the dispute first to the arbitrators instead of court. If your franchisor has such rule, then seek out some former franchisees and ask if they have any complain against the franchisor. Even the best franchises will have franchisees dissatisfied with them; so, always compare their statements with those who spoke in favor of the concept. Besides the UFOC, there are some websites where you can check out about complaints against the company. Franchise consulting websites like brandEXPANSION can also provide you with valuable information.
Evaluate Complaints Against Franchisors Before Signing The Agreement - To learn more about this author, visit Ray Flores's Website.
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Ray Flores
(Visit Ray's Website)
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