#4 of 10 Reasons NOT to Buy a Franchise: Lack of Legal Recourse
Nolo.com features an article titled: Ten Good Reasons Not to Buy a Franchise.
According to the author, there are ten compelling reasons NOT to buy a franchise. We’re looking at them one-by-one.
4. Lack of legal recourse. As a franchisee, there is little legal recourse that you can take if you are wronged by the franchisor. Most franchisors make franchisees sign agreements waiving his or her rights under applicable federal and state law, and some agreements contain provisions allowing the franchisor to choose the venue and the law under which any dispute would be litigated. Shamefully, the Federal Trade Commission (FTC), which is supposed to regulate fairness in franchising, investigates less than 6% of the franchise-related complaints it receives.
This is a valid point. Sadly, the franchisee groups that seem to have legitimate complaints seem legally outgunned by the big franchisors who have airtight legal agreements and powerhouse law firms. For this reason, we urge our readers to investigate their prospective franchisors - both the individuals and the companies - thoroughly before signing the franchise agreement. We also suggest considering the advantages of some of the smaller, regional chains… the “undiscovered franchises” … with whom you’ll have a much greater voice and who will have a greater stake in your individual success.
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