A franchise allows individuals and groups to share their trademark, service mark, trade name, and advertising symbols in order to establish a stronger commercial presence than the businesses could produce individually. However, agreeing to buy a franchise frequently also involves agreeing to participate in marketing plans and supply agreements that are difficult or impossible to negotiate as an individual franchisee. The following article reviews some of the legal franchise advantages and disadvantages from the perspective of the franchisee.
Franchise Law and Marketing
A joint marketing plan is one of the major advantages of a franchise agreement. However, a franchisee’s participation in a marketing plan may involve requirements that the franchisee purchase advertising in local markets, purchase additional supplies, and offer goods or services at a price reduction with little or no input. If your franchise is struggling to profit, these additional expenses may strain an already struggling business’s finances.
On the other hand, participation in franchise marketing plans may allow you to access preferential pricing on supplies, or the franchisor may provide access to funding for advertising efforts.
Whether marketing plans are an asset or liability will depend upon your franchise agreement, which will determine how voluntary the franchisee’s participation is. Where participation is voluntary you will have better control over determining which promotions are most effective in your market.
Supply Agreements and Franchises
One of the fundamental aspects of a franchise is that the franchisee is engaged in the sale of goods or services supplied by the franchisor. This is both the greatest advantage and the greatest liability. One of the most basic rights a consumer has in the marketplace is the ability to seek a different source for their products. Without the ability to seek another vendor, the purchaser is largely at their mercy.
An efficient supply chain should ideally provide lower costs, higher quality, and consistency between franchisees in ways that directly benefit them all. Unfortunately, a mandatory supply chain might just as well saddle you with the opposite of each of these intended benefits.
A comprehensive review of your obligations as a franchisee, as well as a review of the experiences of current franchisees, might provide greater insight regarding your risk and reasonable expectations as a potential franchisee.
Some jurisdictions have provided special statutory protections for those in franchise relationships. These laws typically provide protection for issues that relate to franchise advantages and disadvantages, such as (1) requiring a material breach of a franchise agreement to justify a termination; (2) notice of default and an opportunity to cure; (3) good cause for a franchisor to deny franchisee transfer; (4) franchisee rights to form franchise associations; (5) prohibiting discrimination among similarly situated franchisees; and (6) limiting franchisor’s ability to require litigation in an out-of-state forum. A solid understanding of your state’s franchise laws will help you make a smart decision.
Construction contracts do not necessarily have to be in writing. All states in the U.S. have a law – generally known as a statute of frauds – that requires certain types of contracts to be in writing in order to be a legally enforceable agreement. As the name suggests, the statute is designed to prevent fraudulent claims, especially in the case of large contracts. If contracts listed in the statute of frauds are not in writing, they cannot be enforced. Construction contracts sometimes fall within the terms of a state’s statute of frauds and therefore must be in writing in some instances.
Statute of Frauds
The statute of frauds requires certain contracts to be in writing in order to be valid. The types of contracts that must be in writing are marriage, contracts for more than one year, land, executor/estate, goods that are $500 or more, and surety. Although state laws governing contracts vary, most states have laws that are in line with the general statute of frauds.
Although the statute of frauds does not cover contracts that are about construction, there are certain situations in which a construction contract can fall within the categories listed in the statute of frauds. For example, in Florida, the following types of contracts that might involve construction projects must be in writing – Credit agreements (i.e. construction loan financing); contracts that cannot be performed within one year (such as major construction projects); agreements for the sale of goods over $500 (any contract involving expensive construction materials); and contracts for the sale of real property (contracts involving the sale of improved real estate).
In addition, written contracts for construction work frequently include clauses requiring that any modification of the original written agreement must also be in writing and stating that the written contract constitutes the entire agreement of the parties. Courts will generally uphold and enforce these clauses to defeat an owner or contractor’s claims that there was a separate oral agreement that changed the terms of the written agreement.
Get Your Contracts in Writing
Even if a construction contract does not fall under one of the categories that require it to be in writing, it’s always a good idea to put a construction contract in writing. In fact, it’s a good idea to put any agreement between two parties in writing. A written agreement provides clear terms that each side can refer to in the event of any doubt or disagreement. A written contract can easily reviewed by an attorney, who can point out any ambiguity or problematic areas contained within the contract. Finally, in the unfortunate event of a lawsuit, a written contract provides the court with a clear picture of each party’s obligations under the contract.
Franchise Lawyer Free Consultation
When you need help with franchise law, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506