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Franchising terms, agreements and more

Owning a franchise can be a great business opportunity. However, to truly succeed it is important that one understands everything that goes into franchising. Certain terms used frequently in the world of franchising might seem unfamiliar or even confusing at first, so taking the time to learn more about this aspect of business law can be essential to one’s future success.

Important franchise terms

There are at least two terms with which franchise owners in Georgia should be familiar. The first is royalties. In a franchise, franchisees either pay a set rate or a percentage of sales to the franchisor as royalties. The second term is franchise disclosures, which covers what franchisors are required to disclose to potential franchisees. Required disclosures often include:

  • Average profit
  • Operating costs
  • Company structure

The franchise agreement

After a potential franchisee has had an opportunity to review the franchise disclosure document — FDD — and other important information, he or she will be given the franchise agreement. The franchise agreement is a legal contract to which franchisees are bound upon signing. They are also often written in confusing, technical legal jargon that can be difficult for the average person to decipher.

Moving forward into franchising is a big commitment that requires careful attention to detail and a healthy amount of planning. Immediately signing the franchise agreement without any additional review can derail all the effort and planning that someone initially put in. Instead, anyone who is considering a franchise is well advised to conduct a thorough review of the agreement alongside the careful guidance of a knowledgeable attorney.