Legal Considerations for Food and Restaurant Franchises

Purchasing a food franchise involves significantly more due diligence and regulation than many other businesses. There are critical health and safety laws and certifications you must follow, and it’s essential that you review the industry requirements before you begin. 

At Luther Lanard, PC, we can discuss the legal considerations for franchising a food business and how we can assist you. This is your opportunity to receive insight from experienced lawyers, which can help you avoid costly mistakes and setbacks.

We’re ready to help. To request a consultations with an attorney to discuss your food business in Fort Worth, contact our franchise law firm today.

Understand the Food Franchise Model

In the 2026 Franchising Economic Outlook report from the International Franchise Association (IFA),  franchise industry output should grow by 1.6% to $921 billion in value, adding 150,000 jobs across an estimated 12,479 new establishments. In the food franchising realm, the projection is toward full-service restaurants over quick-service places as consumer tastes change. 

When you buy a food franchise, you are purchasing a license from a franchisor corporation to conduct business under their trademark. You will sell their products with their branding and benefit from their larger buying power to secure supplier and other relationships. You must also follow their direction for the company, accept periodic system changes, and make various improvements.

If you feel this is the right fit for you, you must examine what it means to invest in a food franchise rather than another type. You may start by identifying potential candidates and requesting the Franchise Disclosure Document (FDD) from each. You may also decide to visit expos and conferences such as Franchise Expo Dallas and The National Franchise Show (one of which is held in Dallas). This would allow you to learn from current food franchise owners and understand the pros and cons. 

Key Legal Documents: The FDD and Franchise Agreement

The FDD should give you a first glance into a franchisor’s marketing approach, financials, and past performance. When you obtain the company’s Franchise Disclosure Document (FDD) from the Federal Trade Commission (FTC), you can get a better idea of their longer-term goals and any potential weaknesses. The FDD can be very complicated, but the FDD must be written in plain English. 

Ideally, you will not find anything of significant concern when reviewing the 23 items of the FDD. If all seems promising, you can examine the franchise agreement. 

What is the difference between the FDD and the franchise agreement? The FDD is informational only and not legally binding, unless integrated into the franchise agreement. The agreement is your legal contract with the franchisor and represents a full commitment to their terms, with clauses regarding selling the franchise, renewal options, and dispute resolution methods. 

Texas-Specific Rules That Affect Food Franchises

Other food franchise legal considerations include following rules and laws that are specific to the food industry, such as:

• Texas Department of State Health Services food establishment rules
• Completion of state-certified food handling programs
• Chapter 229 (U) for food establishment permits
• Food allergy awareness posters rules
• Requirement to have a Certified Food Manager on duty
• Recent changes to Texas food labeling laws under SB25
• Food truck regulations under HB2844 as of January 1, 2026

They must also adhere to the Federal Trade Commission’s Franchise Rule. In Texas, franchisees do not have to file for an individual business license, but their franchisor organization must. The company should submit a one-time Business Opportunity Exemption Notice (Form 2703) to the Texas Secretary of State. The company should also file tax reports with the Texas Comptroller and notify the Texas Secretary of State of any changes in principals.

Due Diligence Checklist for Food Franchise Buyers

Before purchasing a food franchise, your franchise attorney in Fort Worth can help you review a due diligence checklist to uncover any possible roadblocks or reasons to reconsider. This process also helps you verify your understanding of what the franchise is worth, and deepens your awareness of a food franchise’s operations and procedures. 

Here is a sample checklist:

• Start with a basic Internet search to review the franchise organization’s website, paying attention to Google reviews and comments from existing franchisees.
• Perform an EDGAR search on the Securities and Exchange Commission (SEC) website for publicly traded franchisors to examine their quarterly and annual reports. 
• Speak to current franchisees at conferences or by contacting existing locations. 
• Search for any violations regarding registration, disclosure, permitting, and health by searching the appropriate oversight agency’s website. 
• Examine the FDD very closely with the help of a franchise disclosure document attorney in Texas.
• Review all financial documents, including tax returns, general ledger, credit report, projections, debt assessments, and gross margins compared to expenses. 
• Analyze business documents, such as the articles of incorporation, list of shareholders, list of assets, schedules of trademarks and copyrights, and real estate leases.
• Clarify your unit economics, including your purchase price, commercial lease costs, CAM fees, retail food establishment inspection fees, and expenses to develop a realistic projection for revenue, profit, and overhead.
• Take time to learn about key employees, contacts you will work with, their payroll system, and their personnel handbook.
• Search for any past or pending litigation and claims against the company.

Carefully read Item 19 data in the FDD for insight into whether the company may be selectively sharing performance and sales data. The goal is to be as well-informed as possible before signing your franchise agreement, so you do not discover unwelcome surprises once you are legally bound to the franchisor. 

Territory, Site Selection, and Lease Terms

Building and buying or selling a franchise in Texas means reviewing a wide range of documents to make the best selection for your goals. You should examine zoning ordinances in your prospective city and determine if land-use plans will impact your future growth. 

Your franchisor can assist you in evaluating a retail location. You should consider the following factors when buying a food franchise in Texas:

• How visible your business will be to customers, using signage and a suitable location
• How accessible your location is for customers, including parking spaces and traffic from major roadways
• Whether other attractive businesses are nearby to drive customers into your territory
• Whether similar businesses or franchises close by could potentially reduce your customer base
• Whether future area building projects and road construction plans could limit access for long periods or make the area undesirable for customers

You should examine your franchise agreement’s location clause that defines your territorial rights, who has approval over site selection, and whether you can relocate. In some instances, a franchisor may retain the right to open additional franchises within your territory, although you can try to renegotiate this clause. If necessary, you could also consider hiring a franchise encroachment dispute lawyer.

Operational Compliance for Food Franchises in Dallas

Food franchises require additional permits beyond building and operations. Your franchisor may be able to assist you in obtaining your Retail Food Operation Permit Application. You will also need food handling certifications through the Texas Department of State Health Services under state law §229.178 Accreditation of Food Handler Education or Training Programs.

If you are franchising a food truck business, you must obtain a special Mobile Unit Food Establishment Permit. You must also train and certify all employees on strict food and safety guidelines from the USDA Food Safety and Inspection Service. Meeting inspection requirements can increase your franchise expenses, so you should consider this when making your selection. 

Exit Paths and Dispute Triggers

After a few years of working diligently, you may find that franchising is not the right fit for you. Perhaps the commitment is greater than you expected, or you are unhappy with how the franchisor does business. Here are some common situations regarding exit paths and how to manage disputes in the franchise industry.

Selling Your Franchise

Part of doing business is knowing when it’s time to exit a relationship for your success. In rare instances, you may need to sell your franchise, which typically requires the franchisor’s consent. You should verify your rights under the agreement and understand whether the franchisor can stop your sale. 

You will need to develop a marketing plan to sell your franchise, prepare the necessary documents, and understand your prospective timeline. If you are trying to transfer your franchise to another owner, you still likely need the franchisor’s consent before completing the transaction. 

Restrictive Non-Compete Clauses

One problem that some franchise buyers overlook is the non-compete clause in the agreement. Because you always need an exit strategy, it is vital to review how this clause may restrict your ability to enter similar businesses if you leave the franchise. Some clauses may even try to prevent you from paid consulting or working for other franchisees, although not every non-compete clause is enforceable. 

Renewal Period and Terms

Another critical clause to examine and try to negotiate before signing your franchise agreement is the one concerning the length of your agreement and its renewal terms. The franchisor may demand more restrictive terms for renewals, or could amend their terms during the course of your contract. Unexpected fees and commitments could be a cause for dispute resolution.

Dispute Options

If you discover that the franchisor misled you, you have the right to take action under the  Texas Deceptive Trade Practices Act. You can initiate legal proceedings for material omissions, financial misrepresentations, or false information in the FDD or franchise agreement. The agreement usually contains clauses regarding the resolution of disputes through binding arbitration or alternative dispute resolution (ADR) methods. 

Beyond ADR

If mediation is not enough, you may need to escalate your actions to litigation via a lawsuit. Review your franchise agreement closely with your attorney to determine if the franchisor has choice-of-law and forum clauses, which can dictate where the legal action must take place. These are rarely worded in your favor as a franchisee, so it is smart to propose amendments during the initial review process before you sign.  

Contact an Attorney Near You for Help with Your Texas Food Franchise

At Luther Lanard, PC, it is our mission to support franchisees every step of the way in their business journeys. When you examine our results from past clients and meet with our team, we believe you will feel we are the right choice to guide you. To contact our food franchise lawyers in Fort Worth, contact our law firm today. 

Frequently Asked Questions About Franchising a Food Business in Texas

Below are answers to questions about how to open a food business franchise.

Do franchisors have to give the FDD before you pay anything or sign anything?

Yes, according to the Franchise Rule under the Federal Trade Commission (FTC), franchisors must provide their FDD to you at least 14 calendar days before you sign the franchise agreement or pay fees. 

Can you negotiate a franchise agreement, or is it “take it or leave it”?

Many are non-negotiable, but it depends on the size of the franchise system. Your franchise agreement lawyer in Fort Worth should review the contract to identify complications and what, if any, can be negotiated. Regardless of the franchisor’s stance on negotiation, you have the right to request it. 

A franchise agreement review in Texas should examine territorial rights, provisions for required systems changes, distribution of costs, required supplier contracts, and dispute resolution procedures. 

What are the biggest red flags to look for in Item 19 financial performance representations?

You should review all aspects of the FDD with your franchise attorney for red flags, such as the following ones that frequently appear in Item 19:

• Reports showing only the top-quartile data
• Projections that seem unrealistic or cannot be verified 
• Cherry-picked data that may leave out negative performance metrics
• Only corporate-owned location data vs. franchisee-owned information
• Absence of data from closed locations
• Verbally reported sales figures without supporting documentation
• Missing expense data or incomplete operating cost categories
• Small data sample sizes
• Vague language suggesting the data may be unreliable 

You should also review any changes to FDD Item 19 guidelines with your lawyer that may affect your decisions. 

What is the Texas “Business Opportunity Exemption Notice,” and does it apply to my purchase?

Under the Business Opportunity Act, all franchisors must file a Business Opportunity Exemption Notice with the Texas Secretary of State before they can operate within Texas. This only applies to franchisors, not you as a franchisee, even if you are purchasing an established location. 

However, part of your due diligence should be to verify that your franchisor organization has completed this step and is operating legally in Texas.