Legal Considerations for Franchise Buyers and Owners in Florida

Reviewing the Franchise Disclosure Document

The FDD contains extensive information about the franchisor, fees, litigation history and obligations of both parties and should be reviewed well before any deposit or agreement is signed. It is disclosure, not negotiation, but it frames what will later be negotiated in the franchise agreement itself.

• Initial and ongoing fees, including royalties and marketing fund contributions.
• Territory rights and any exclusivity or protection from nearby franchisee competition.
• Litigation and bankruptcy history disclosed for the franchisor and its affiliates.
• Renewal, transfer and termination provisions that will govern the life of the relationship.

Negotiating the franchise agreement

While core economic terms in franchise agreements are often standardized across franchisees, certain provisions can sometimes be clarified or negotiated, particularly around territory, personal guarantees and default cure periods.

• Scope of any personal guarantee required from the franchisee owner.
• Default and cure provisions and the franchisor's remedies on default.
• Approval rights over lease terms, build-out and location selection.
• Transfer conditions if the franchisee later wants to sell the location.

Coordinating the lease with the franchise agreement

Franchise agreements typically require franchisor approval of the lease and the location, and require the lease to include specific provisions, such as franchisor step-in rights on default. Lease and franchise agreement negotiations should proceed in coordination, not in sequence, to avoid conflicting terms.

Franchise ownership and immigration pathways

Franchise purchases are a common E-2 investment vehicle because they typically come with an established operating model, training and financial projections drawn from franchise system data, which can support the business plan and non-marginality analysis.

Multi-unit franchise development agreements, where an investor commits to opening several locations over time, can also support a stronger investment and job-creation narrative for immigration purposes.

Multi-unit and master franchise structures

Investors developing multiple units, or acquiring master franchise or area development rights, take on additional obligations, including development schedules and sub-franchising responsibilities where applicable, which should be reviewed with particular attention to default consequences across the entire portfolio.