Franchise Attorney in New York, New York
How does buying a franchise work?
How does buying a franchise work?
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well it depends if you’re buying from a
franchise or the franchise or has to
give you uh disclosure uh usually in the
form of an FDD they have to uh provide
you with other documents that you have
to give to them you have to uh give them
an application you have to tell them
about your financial uh background you
have to tell them about the things that
you’ve done uh what your field is they
assess that and then if you if you
qualify they usually have a meeting so
that they can assess you personally if
you get beyond that stage now the
franchisor gives you all the documents
that you have to sign including of
course the franchise agreement the
guarantee the software agreement the
confidentiality agreement the trade
secret agreement all the various things
that you have to sign as a uh as a
franchisee to become a franchisee so the
franchise or documents are in that
category if you’re buying from a
franchise it’s somewhat different
because now you’re buying a going
business so you’re still going to get a
lot of that disclosure but you’re going
to get financial information from the
franchisee that you’re buying from their
tax returns financial statements you’re
going to want to get their lease because
you’re going to be taking over their
lease and while the franchisee doesn’t
have to give you uh disclosure what
really happens is that the franchise or
usually says well if you sell an
agreement franchisee your buyer is going
to have to sign the current form of
franchise agreement and that triggers
the obligation on the franchisor’s part
to give you that disclosure that we just
discussed
New York, NY franchise law attorney Richard L. Rosen explains how buying a franchise works. He states that the process varies depending on whether someone is buying directly from a franchisor or purchasing an existing franchise from a current franchisee.
If buying from a franchisor, the prospective franchisee must first receive a disclosure, typically in the form of a Franchise Disclosure Document (FDD). They also provide the franchisor with an application, including information about their financial background, professional experience, and relevant field of expertise. The franchisor assesses this information and often conducts a personal meeting to evaluate the candidate further. If the candidate qualifies, the franchisor provides all the necessary documents to sign, including the franchise agreement, guarantee, software agreement, confidentiality agreement, and trade secret agreements.
When buying from a current franchisee, the process differs slightly because it involves purchasing an existing business. The buyer still receives some franchisor disclosure, but they also need financial information from the selling franchisee, including tax returns, financial statements, and the existing lease. While the franchisee isn’t legally required to provide disclosure, the franchisor typically mandates that any new buyer sign the current form of the franchise agreement, which then triggers the franchisor’s obligation to provide the full disclosure.
