Stephen A. Katz, P.C.
111 John Street, Suite 800
New York, NY 10038-3180
(212) 349-6407 (Fax)
EVALUATING A FRANCHISE OPPORTUNITY
A franchise typically requires investing between several thousand and several million dollars, and also obligates the franchisee to pay royalties and other fees. Obviously, it pays to evaluate the investment carefully. But unlike a real-estate purchase, in which tests for structural defects and termites are inexpensive and well known, a franchise’s soundness is complex and must be evaluated in many different ways.
Here are some of the factors that attorney
Katz considers, and the methods he uses, to help his clients decide whether
to invest in a franchise:
You can learn about the franchisor, including past or pending complaints against it, from the Federal Trade Commission in Washington and the regulatory board of the state in which it is located.
The client may want to have a business-school professor or other expert evaluate the franchisor’s business plan. Attorney Katz receives no money for this service from either his client or the expert, but he believes that this can be money well spent if the expert is astute and is not too expensive.
Attorney Katz will evaluate the contract that the franchisor wants the franchisee to sign, and negotiate changes in terms that are onerous to his client. Under what circumstances can the franchisor terminate the franchise? What state’s law will govern if a franchisor–franchisee dispute arises? Is the franchisor free to sell franchise products nearby, for example, in supermarkets, and to compete with the franchisee’s sales? Etc. The contract must be scrutinized to protect the franchisee.
The UFOC is a form that the franchisor is required by law to fill out, and it discloses a lot of important information about the franchisor and its business. Katz will review it and point out the strengths and weaknesses of the investment.
Has she retired? Been laid off? Does she wants to quit a salaried position and be her own boss?
How much does she need to earn? How much does the franchisor promise that its franchisees will earn?
What terms govern these important facets of a franchise:
This has been a partial list of the factors that attorney Stephen A. Katz considers when he evaluates a franchise purchase with a client.
For people who are considering buying a franchise, attorney Katz is happy to provide general franchise information, apart from legal information. How long do franchise terms usually last? Is 10% a high franchisor's royalty, or just average? Has Katz heard complaints about a particular franchise recently? This type of franchise information is needed by investors to make informed choices, and Katz is available to provide it whenever possible.
An Explanation of Attorney Katz’s Legal Fees
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