Franchising is a business option available to both established companies and beginning entrepreneurs. Each party faces its own risks, which can be best reviewed by an established business lawyer.
Franchisors are the parent company in the franchising agreement. They usually have at least one business location already developed and are looking to expand. By franchising, the company is able to expand faster and at less cost, because a third party performs the day-to-day operations. The franchising agreement entails that the franchisor receives a royalty for allowing the franchisee to use its business model, trademarks, copyrights, etc.
For franchisees, franchising can be an easy way to start up a business. A fee, usually between $30,00 and $100,00, is paid to a successful parent company for the use of its business plan. This start-up is quicker than starting a company from scratch. Many times, the parent company will train franchisees in order to maintain consistent quality throughout stores. The franchisor usually pays for advertising, as well. In return, 4-5% of the franchisees profits is given to the franchisor.
Whether a business is looking to expand or an entrepreneur is looking to open a location of an already established parent company, a business attorney can walk clients through the necessary steps and offer advice on difficult business decisions.