Many people do not understand that it takes months of preparation to open the franchised outlet. I can remember times, When franchised buyers were shocked to learn that it could take up to 60 days to start their business from the time they paid their franchise fee & signed the franchise agreement. Imagine how long it takes to open a hotel or a fast food restaurant that is not even built yet. It might take years to get through planning commission, purchased the property and build it. Our franchise company was relatively simple, and that is because it was a mobile franchised business, home-based. Nevertheless, we had to address this issue in our franchise agreement so that buyers understood what was ahead. Below is a clause that I designed and put into each franchise agreement. 3.8 Opening of Business Before Franchisee commences business operations Franchisee must have all licenses, certificates, registrations, insurance, environmental requirements and permits current with any local, regional, state or national governmental agency requiring such. Franchisee must also have completed training, purchased their vehicle(s), purchased, taken delivery of and installed the required equipment on their mobile car wash trucks/units and purchased and taken delivery of the additional required equipment and supplies. Unless otherwise agreed in writing, Franchisee must commence full and continuous operation of the Franchised Business within sixty (60) calendar days of the date this Agreement is executed. Thereafter, Franchisee must continually operate the Franchised Business as a full-time business enterprise. Franchisee understands that both Franchisee and Franchisor may be allowed more than sixty (60) days in case of unforeseen problems with delivery. Franchisee may delay delivery time and subsequently the length of time to the opening of their Franchised Business due to Franchisee's inability to secure financing in a reasonable time. If Franchisee is delayed in commencing business operations for causes reasonably beyond the control of Franchisee, then the time for performance by Franchisee will be extended for a period equivalent to the time of the delay. If this commencement of operation obligation is not fulfilled, Franchisor may terminate this Agreement. --- --- --- --- ---- It would be wise to discuss strategies to address this issue in the franchise agreement if you are a franchising company or executive. In fact it is essential that you discuss this with a knowledgeable and experienced franchise attorney. Consider this in 2006. |
