{"id":5452,"date":"2017-01-12T10:29:52","date_gmt":"2017-01-12T15:29:52","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/legal-advantages-and-disadvantages-of-buying-a-franchise.html"},"modified":"2026-05-29T13:25:00","modified_gmt":"2026-05-29T18:25:00","slug":"legal-advantages-and-disadvantages-of-buying-a-franchise","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/legal-advantages-and-disadvantages-of-buying-a-franchise.html","title":{"rendered":"Legal Advantages and Disadvantages of Buying a Franchise"},"content":{"rendered":"\n
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Legal Advantages and Disadvantages of Buying a Franchise<\/h1>\n\n
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\n By Amber Sheppard, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Buying a franchise offers advantages like built-in brand recognition, marketing support, and proven operating systems. However, owning a franchise has disadvantages such as high ongoing costs, limited location flexibility, strict supply agreements, and potential breach of contract lawsuits if corporate rules are violated.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Rather than form a startup, some business owners<\/span> decide to\u00a0buy into a franchise <\/span>business<\/span> model<\/span><\/a>. Some common examples are fast food<\/span> chains like McDonald\u2019s<\/span> or coffee and donut locations like Dunkin\u2019 Donuts. This allows the small business<\/span> entrepreneur<\/span> to use the franchisor<\/span> company\u2019s brand name, built-in customer base<\/span>, and brand recognition<\/span>.<\/p>\n

Before you agree to open your own business<\/span> under a franchise agreement<\/span> as a franchisee, understand your legal responsibilities and potential consequences. This FindLaw article explains business ownership under the franchise business<\/span> structure.<\/p>\n

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Franchise Agreements<\/span><\/h2>\n

As a franchise owner<\/span>, your franchise agreement<\/span> explains your legal obligations when you buy into an established brand<\/span> franchise. It should mirror what you got in the\u00a0Franchise Disclosure Document<\/a>\u00a0(FDD<\/span>). It lists your initial investment<\/span>, including initial costs and franchise fees<\/span>. It also includes franchise location<\/span> restrictions and your ongoing royalties<\/span> to the corporation<\/a>.<\/p>\n

Your franchise agreement<\/span> also acts as your franchise contract. If you or the franchise do not follow it, then that is a\u00a0breach of contract<\/a>. It means you are in default and could face a court case with damages.<\/p>\n

There are lower risks<\/span> in opeFranchise Agreements<\/p>\n

As a franchise owner<\/span>, your franchise agreement<\/span> explains your legal obligations when you buy into an established brand<\/span> franchise. It should mirror what you got in the\u00a0Franchise Disclosure Document<\/a>\u00a0(FDD<\/span>). It lists your initial investment<\/span>, including initial costs and franchise fees<\/span>. It also includes franchise location<\/span> restrictions and your ongoing royalties<\/span> to the corporation<\/a>.<\/p>\n

Your franchise agreement<\/span> also acts as your franchise contract. If you or the franchise do not follow it, then that is a\u00a0breach of contract<\/a>. It means you are in default and could face a court case with damages.<\/p>\n

There are lower risks<\/span> in opening a franchise instead of an independent business<\/span>, but risks still exist.<\/p>\n

Advantages of Franchising<\/h2>\n

Thanks to the advantages available to franchisees, your business can be successful. For example, you get a fully vetted and proven business plan. You also get an existing business marketing plan, business operations and manual, and proven systems and processes.<\/p>\n

Brand Recogning a franchise instead of an independent business<\/span>, but risks still exist.<\/h3>\n

Advantages of Franchising<\/h2>\n

Thanks to the advantages available to franchisees, your business can be successful. For example, you get a fully vetted and proven business plan. You also get an existing business marketing plan, business operations and manual, and proven systems and processes.<\/p>\n

Brand Recogwill have franchise standard food, products, or services.<\/h3>\n

Franchise Operations Manuals<\/h3>\n

You get proven processes and systems as part of your initial <\/span>franchise fee<\/span> and ongoing franchise fees<\/span>. These are\u00a0Standard Operating Procedures (SOPs)<\/a>. They are checklists and manuals that detail how your store should look, operate, and handle employee situations. The typical entrepreneur<\/span> has to do this from scratch and work through trial and error. This should be resolved before a franchisor<\/span> offers their franchise to others.<\/p>\n

Insurance Coverage<\/h3>\n

Your franchisor<\/span> may insure your location. If someone sues you, the corporate policy might possibly cover some damages. You will have to have your own\u00a0liability insurance<\/a>\u00a0as well, but two policies are helpful.<\/p>\n

Marketing Plans<\/h3>\n

With an established business franchise as your business model<\/span>, you will likely have access to their social media marketing campaigns. This means your franchisor<\/span> may give you:<\/p>\n