How To Know Your Rights if Franchise Ownership Changes

When a franchise changes ownership, but before that change occurs, you need to examine your rights. Let’s examine a few key areas of a franchise.

Before entering any franchise agreement, a lawyer should be contacted. Consulting with a qualified lawyer should be a high priority because many issues, questions and concerns will arise when a franchise is created or when it changes ownership.

In addition, be sure to take time to read thoroughly your franchise disclosure and contract documents before you sign. Be especially cautious if you read anything that does not define or clarify your rights should the franchise change ownership or becomes bankrupt.

If there are any areas that are unclear in the disclosure documents before you sign the franchise agreement, be sure to ask for a later date to consult, so that you can ensure that everything is on the up and up.

When you find out that your franchise has changed ownership, ask the new owner of the franchise to rethink contract terms that are more favorable for you or perhaps discuss on how to extend the current terms. Understand this, that with certain franchise contracts, the new franchiser may alter restated mutual obligations.

Make sure to read the original franchise agreement for any unclear or gray areas that may act against you. And, it would be a good idea to ask the new owner if you can be released from all obligations of the contract so that a more open and clear communication can begin for all concerned.

In most cases when a franchise changes ownership, the outcome is positive because the new franchiser will be excited and want to build, protect and encourage his or her investment. In addition, a change of ownership will often give a positive end result of energy and revitalization.

On the other hand, a change in ownership can be negative if a new owner comes in with different goals and an agenda that differs greatly from the former one, such as expansion in areas that have never been considered before or adding to the franchise in a way that is risky, adding unneeded stress to the business. Should this happen, the franchisee may have the power to state that he or she will not operate or agree to such obligations or rights.

In addition, it is wise before entering a franchise to examine carefully the financial position of the intended franchiser. And it is reasonable and necessary to be informed about the management structure of the franchise and the goals and long-term plans intended for the coming years. Also, it is important to find out about succession planning, in the event of the franchiser's death.

To conclude, a franchise is a partnership and it helps to understand that franchisers are not perfect and from time to time, will make poor decisions. However, with the sharing of problems and resolving of issues, ongoing and positive communication and careful planning, a successful and positive franchise can be the end result.