Modern franchises can be a great way to quickly expand your brand, but there are many downsides to franchising. One of the most serious considerations is the incredible litigation between franchisees and franchisors. The cost of protecting your Franchise Company from the attorneys of disgruntled and / or non-compliant franchisees can be very costly.
It wasn’t long before my retirement that I ran a franchise company and even wrote franchise agreements for our companies and international franchise agreements; many more than 180 to 200 pages of mandatory disclosure documents. One part of the repetitive clauses that I remember the most is one that we always put at the end of our franchise agreements, which was titled “Questions about this franchise agreement” and the basic essence of it all was to make sure that the franchisee could not get out of it. contract claiming that you never read it or did not understand a specific part of it, which in fact could easily happen in 200 pages of legal garbage, right? In any case, the clause looked something like this:
“The franchisee understands the intent of each paragraph of the franchise agreement and the franchisee has asked all questions on any subject that he did not understand and has consulted competent advisers to help them determine the exact meaning of everything in this franchise agreement. In addition, the franchisee is considered mentally competent and that nothing written in this Franchise Agreement still seems ambiguous to the Franchisee. There is nothing in this Franchise Agreement that the Franchisee did not understand at the time the Franchisee signed this Franchise Agreement. The Franchisee has shown this Franchise Agreement to consultants and / or advisers to whom they feel comfortable and the advisors of the Franchisee and the Franchisor have reviewed this Franchise Agreement and the related and attached agreements with the Franchisee. The Franchisee has written questions and marked them personally when the Franchisee felt that they were adequately answered both by the Franchisor and by the advisors of the Franchisee “.
Now, on the surface, you might think that’s no big deal, right? Well, without such clauses, you could be sued and someone who doesn’t fulfill their part of the settlement could cheat you out of money. It seems with all the regulation and litigation that it is really surprising that after 200 pages of a legal document you have to have such a clause in the agreement. But with the kangaroo courts and head-high juries and liberal judges, imagine? This is just one of the reasons I retired in my 40s from the franchise industry. Consider this in 2006.