Purchasing a franchise business can be an excellent way to gain immediate name recognition, customer loyalty and the kind of professional advertising and business resources that a large chain corporation can provide. However, a franchise also includes a number of potential drawbacks, including high start-up costs and operational and ownership restrictions. And a long-term franchise agreement can leave you financially obligated for much more than a lost business investment.
The Los Angeles business lawyers at Howard Law urge anyone considering the purchase or formation of a business -- including those contemplating the purchase of a franchise -- to contact an experienced attorney.
A 25-year study by the U.S. Chamber of Commerce suggests that the 5-year success rate for franchise businesses is between 86 and 97 percent, compared to about 50 percent for independent businesses. However, the startup costs can be significantly higher (averaging $250,000 not counting real estate) and a business owner's ability to earn a fair living can be limited by startup cost and ongoing franchise fees.
Many variables go into determining the viability of a franchise business. Even under the terms of a well-written franchise contract, California law may still govern the rights and obligations of the parties to a franchise agreement. Oral agreements and ambiguous wording can leave the parties open to additional liability. Additionally, issues of fraudulent inducement, estoppel (an assertion that a promise was made not to enforce a certain clause) and recoupment (the length of time a dealer reasonably expects to recoup an investment), may impact a franchise agreement between parties.
Unlike starting many small businesses, a franchise agreement can subject a small-business owner to liability beyond the expenditures inherent in a business failure. Unfortunately, business owners sometimes follow their dreams, and the euphoric promises made by a national chain, and fail to take the steps necessary to protect their legal rights and financial well-being.
At Howard Law, our clients benefit from the resources of each of our legal departments, including business litigation, bankruptcy protection, estate planning and real estate law. Our Los Angeles franchise attorneys offer confidential appointments to discuss your legal needs throughout the Los Angeles area, including Riverside, Santa Ana and Anaheim.
Los Angeles Franchise Lawyer - Call (800) 872-5925 - Howard Law