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Why potential franchisees in Georgia need to be extra vigilant

On Behalf of | Apr 8, 2020 | Franchise Law |

Thinking about becoming a franchisee? This path has advantages for someone who wants to be a business owner. One of the most attractive benefits is that, while you will, in many ways, be largely independent, you will not be in business alone. You will reap the rewards of a well-established brand with an existing customer base—something that new business owners must work hard and long to attain. You will also receive support with your business launch. You will be working with proven products or services.

However, there is a flip side to every coin. The same is true for franchise ownership. The products and procedures of the franchise may restrict your growth. Also, you must pay fees and royalties. If the higher-ups run the franchise poorly, the consequences can affect the entire operation, including the well-run locations. You may not have a say in how long you operate your business.

In Georgia, you may have to be even more vigilant in doing proper due diligence than in other locations.

Why is Georgia different when it comes to franchising?

Georgia is not a franchise regulation state. This means that you don’t have to pay a fee and file paperwork with the Georgia Secretary of State. However, it also means that the laws governing franchisor and franchisee relations could be less stringent than in other locales.

The Federal Franchise Rule and the Georgia Franchise Act govern franchising rules here. These offer protections, but legal issues can still arise.

What legal issues might arise?

  • While the Federal Franchise Rule requires a certain amount of disclosure, some jurisdictions require full transparency about things like the franchisor’s current financial health and pending legal issues. Georgia is not one of those jurisdictions. It’s vital to do your due diligence beyond the disclosures provided to you in the mandatory Federal Disclosure Document. You don’t want any surprises.
  • There should be clarity in the contract about the franchisor’s intention to provide ongoing support when necessary. If not, this is a point to discuss and have your lawyer try to add to the contract. If a franchisor fails to provide ongoing support in violation of the franchise agreement, you will be legally protected.
  • Is there a limit to how many franchisees can occupy your local area? There should be. This is an issue to bring up at the franchise agreement stage to prevent future issues.

The great state of Georgia is an excellent place to start your franchisee career. However, make sure to do your due diligence to protect yourself from potential legal problems. It’s better to have the protection and not need it then to be without it when it counts.