Franchise Rules and Regulations
There are several rules and regulations in franchising, and a successful franchise business needs to make sure they are always compliant. It is essential for franchise systems to comply with the laws and guidelines set forth by the larger corporation from which the franchise is a part of. This is important in order for the business to grow. The franchisee will be required by the franchisor to follow certain rules, and it is the franchisor's responsibility to apply and require that the local rules be followed by the franchisee. Rules such as regulations of the premises and building sites, mandatory insurance, state controls, etc.
It's very important to understand the different types of regulations and insurance, since franchise agreements do involve various levels of risk. The franchise agreement usually stipulates that the franchisor is required to have property insurance as well as other types of insurance. It's important to find out how much you will be spending all togehter, for you may need to apply for a initail franchise start up loan.
Other types of insurance, such as workers compensation insurance, may or may not be required, it depends on the laws from the state you're in. It is the insurance company's responsibility to highlight in careful detail what exactly they will deliver to you, how claims are processed and handled, etc. Some franchise companies also require life insurance policies for you and the owners of the business. These are all examples of costs that need to be included into your overall startup spend.
Franchisees typically required liability insurance, and if not stated in the franchise agreement, they should required to have that included as an adenddum. This could have a value of $1,000,000 or more, the franchisor should advise on what's required by the larger corporation, then a lawyer or an attorney will be able to point you to the best sources for funding.
It's extremelly important to understand, thoroughly read and ask your attorney or lawyer about the franchise agreement. In it all areas of compliance requirements are identified. Seek legal advice before proceeding with the agreement, wihtout the proper information, the already present risks can be significant higher.
Back to Articles