Check your contract before you sign up for a franchise

| Sep 21, 2020 | Business Litigation |

Before you opened your convenience store, you may have dreamed about being your own boss. If you signed up to a franchise, it could leave you wondering who is really in charge.

Becoming a franchisee can bring significant advantages. You can benefit from the parent company’s brand and marketing. You can gain access to lower prices due to their bulk buying powers. However, you may need to sacrifice a lot of independence in return, as some 7-Eleven franchisees found out.

You must sacrifice freedom to take a franchise

Here are some of the things to check before you sign a franchise contract:

  • Who dictates your opening hours? Do you want to give your staff Christmas day off? Your franchisor may force you to open.
  • Who dictates your suppliers? You will probably have to use the named supplier for specific products, but can you also use those you choose for other products?
  • Who dictates your layout? Have you ever noticed that when you walk into certain franchise stores, they all look the same? You may not have much room for creative control.
  • Who dictates what you sell? Fancy selling homegrown organic lettuce from your yard? The contract may forbid it.
  • Who dictates pricing? Expect there to be strict pricing rules you must follow.

Aside from the practicalities of running the store, one of the critical issues to clarify is your employment status. Several Massachusetts 7-Eleven franchisees are appealing a recent court decision regarding the ABC rule. They say it would leave them classified as contractors rather than employees. Employees have more rights in exchange for less freedom. They argue that 7-Eleven is not giving them either the rights or the freedom.

As with any business contract you sign, the devil is in the details. You can be sure the franchisor has a legal team checking every contract they issue. Make sure you do the same.