Franchising can be an effective way to get a business off the ground that already has a build-in market and efficient procedures. In other words, successful franchising can be a quick way to give you some ownership and income opportunities.
However, not all franchising agreements are created equal, and even those that look sound can be violated in the blink of an eye. With that in mind, you should be careful when entering into one of these arrangements, as you’ll want to do everything you can to protect yourself and your financial interests.
The FTC files suit against burger chain
Many franchisees may be doing just that and benefitting from legal action against their franchisor. There, the Federal Trade Commission levied a lawsuit against burger chain Burgerim. According to the lawsuit, Burgerim and its owner improperly withheld pertinent information from its franchisees and made false promises that induced franchisees to buy into the business.
About 1,500 individuals secured franchising rights from Burgerim, paying as much as $70,000 for what the chain claimed was a “business in a box.” Perhaps the biggest promise that was made but went unfulfilled was Burgerim’s claim to prospective franchisees that it would refund the franchise fee if the business was unable to open. The FTC now wants Burgerim to face fines and payback money that it wrongfully took from franchisees.
A lesson learned
This case highlights the importance of ensuring that your rights are protected in your franchise agreement. After all, strong language in these agreements is going to be your saving grace in the event that something goes wrong.
To better understand the terms of a franchise agreement that you’re thinking about signing off on, you may want to discuss the matter with an attorney who is experienced in this area of the law. If you’re already a franchisee but suspect that your agreement has been violated, then please consider consulting with a legal professional who can help you protect your interests.