franchise-agreementWhether it’s a restaurant, retail store, auto dealership or any other type of business, operating a franchise is often a great way to get your feet wet as a small business owner. You often get the benefits that come from working with an established franchisor and a recognizable brand, and it frees you from the idea that you need to develop a totally unique concept before you can even think about running a company.

At the same time, however, there will be certain expectations by which you must abide, and they will be set out in a franchise agreement. Although the franchise agreement can save you from having to make various tough decisions about the business, it also identifies a number of requirements. Here’s an overview of some of the matters a franchise agreement is likely to cover:

  • Royalties: As a franchisee, you will likely be obligated to make royalty payments to the franchisor on a regular basis in exchange for your right to operate under its banner and sell its products. While the amount of your payments will be based on your revenue, having to pay royalties can also impact your profit margins.

  • Location: With a franchise, you won’t have as much freedom when it comes to choosing a location for the business or being able to move in the future. The franchisor will typically choose a site based on local competition, as well as on other franchise locations.

  • Appearance: You’ve likely noticed that, when you visit a big chain restaurant in one city, it’ll look very similar to a franchise in another city. Standardized appearance, color schemes, signage, employee uniforms and menus will often be requirements outlined in the franchise agreement.

  • Advertising: In addition to royalty payments, most franchisors also require franchisees to make payments toward advertising. Although advertisements may not be specifically targeted for your location, you can still benefit from national ad campaigns that draw attention to the company as a whole.

  • Operations: The vision and policies of the franchisor may even have an impact on your business’s daily operations. For example, you may be required to stay open during certain hours, work with particular distributors and get franchisor approval for some key business decisions.

Not surprisingly, all of these factors could have a real impact on the success of your business, for good and for ill.

Operating a franchise can be a rewarding and educational experience, and understanding the franchise agreement can go a long way toward helping you get the most out of your time as a franchisee. If you’re considering delving into the world of operating a franchise, consult an experienced and knowledgeable U.S. Virgin Islands business law attorney before signing any agreement. An attorney can help you understand the document, explain your rights and responsibilities as a franchisee and answer any questions you might have about the entire process.

BoltNagi is a respected and well-established business and corporate law firm serving entrepreneurs and business owners throughout the U.S. Virgin Islands.