Franchise Agreement Consumer Law

Franchise Agreement Consumer Law: What You Need to Know

If you are considering purchasing a franchise, it is important to understand the laws that protect consumers and franchisees. Franchise agreements can be complex and filled with legal jargon, making it difficult for the average person to understand their rights and obligations. In this article, we will provide an overview of franchise agreement consumer law and what you need to know to protect yourself.

What is a Franchise Agreement?

A franchise agreement is a legal contract between a franchisor (the company that owns the franchise system) and a franchisee (the individual or business that purchases the right to operate a franchise). The agreement outlines the terms and conditions of the franchise relationship, including the use of the franchisor`s trademarks, proprietary information, and operating procedures.

What Laws Protect Franchisees?

The Federal Trade Commission (FTC) enforces laws that protect franchisees and consumers in the franchising industry. The FTC requires franchisors to provide a Franchise Disclosure Document (FDD) to potential franchisees before they purchase a franchise. The FDD must include information about the franchisor`s business experience, litigation history, fees, and other important details about the franchise.

State laws also provide protection for franchisees. Many states have adopted laws that regulate the franchising industry and require franchisors to provide certain disclosures and protections to their franchisees. These laws vary by state, so it is important to research the laws in your state to understand your rights and obligations as a franchisee.

What Should You Look for in a Franchise Agreement?

Before signing a franchise agreement, you should carefully review the terms and conditions of the agreement. Here are some key provisions to look for:

– Territory: The agreement should specify the geographic area where you are allowed to operate your franchise. Make sure the territory is large enough to support your business and that the franchisor will not open another location too close to your territory.

– Fees: The agreement should outline all the fees you are required to pay, including the initial franchise fee, ongoing royalties, and advertising fees. Make sure you understand how these fees are calculated and whether they are subject to increase in the future.

– Operating Standards: The agreement should include detailed operating procedures and standards that you must follow as a franchisee. Make sure you understand these procedures and that they are reasonable and practical for your business.

– Termination: The agreement should specify the circumstances under which the franchisor can terminate the agreement and how much notice they must give you. Make sure you understand the consequences of termination, including whether you are allowed to operate a similar business after termination.


Franchise agreement consumer law is complex, but it is important to understand your rights and obligations as a franchisee. Before signing a franchise agreement, make sure you review the agreement carefully and understand the provisions that could impact your business. If you have any questions or concerns about your franchise agreement, seek advice from a lawyer or other professional who is experienced in franchise law.