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Five Things that Must Be Addressed in a California Franchise Agreement

franchise.jpgFor franchisees, their franchise agreement is the fundamental foundation of their investment. If you are considering putting your hard-earned money into a franchise in the Bay Area, it is imperative that you have a well-crafted franchise agreement. Your agreement must be clear and it must adequately protect your legal rights and business interests. Here, we list five critically important issues that must be addressed in your California franchise agreement.

Franchisees Should Not Sign Until These Issues are Resolved

1. Training: As a new franchisee, you would benefit substantially from a proper training program. Within your franchise agreement, there should be a concrete plan that details precisely how much training you will receive, and to what extent your franchisor has an obligation to provide ongoing training and guidance.

2. Ongoing Support: Beyond receiving ongoing training, your franchise agreement should also spell out what type of other support your business will get from the franchisor. For example, depending on the precise nature of your business, you may be entitled to receive bonuses, access to loans, capital for property upgrades, access to discounts from suppliers and much more.

3. Exclusive Territory: The current business climate in Silicon Valley and the Bay Area is extremely competitive; the last thing you need is to be pitted against another branch of the same franchise of which you are a part. Your franchise agreement must outline exclusive territory for your business. Without this, your ability to grow your customer base, and maximize revenue, could be limited.

4. The Total Investment Costs: Before you invest in a franchise, you need to have a clear view of the total cost of investing in the business. Do not focus solely on upfront payments. You must also consider royalties and any other ongoing costs. Sometimes, franchisors take advantage of franchisees by disguising or understating ongoing costs. Until you consider the total cost, you will not be able to truly understand the viability of the business opportunity. Your franchise agreement must make the total costs clear.

5. Renewal Rights and Resale Rights: Finally, your franchise agreement should also outline your rights and responsibilities when it comes to renewing the contract as well as selling or transferring your business interests. Ideally, you will want as much control as possible over your business. Fortunately for franchisees, the California Franchise Relations Act (CFRA) provides considerable protections in this realm. Though, it certainly does not provide complete protection. Franchisees need to take proactive steps to ensure that their franchise agreement is truly in their best interests.

Contact Diemer, Whitman & Cardosi, LLP Today

If you are a current or prospective California franchisee, and you are in need legal assistance, please contact our experienced San Jose business litigation attorneys today. We have experience drafting, reviewing and litigating California franchise contract. From our office in San Jose, we proudly represent companies throughout the region including in Contra Costa County, Napa County, and San Mateo County.



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