Understand What You’re Signing Before You Commit
Franchise ownership can offer structure, mission alignment, and a clear path to business leadership for many veterans. But before committing, it’s important to understand the legal risks within the franchise agreement.
The Franchise Disclosure Document (FDD) and the contract you’ll be asked to sign are not just formalities. They define your rights, obligations, and how much control you’ll have moving forward. For veterans who value discipline and clear expectations, reviewing these documents carefully is essential.
Key Legal Risks to Watch Out For
1. Territory Limitations
Check if your territory is exclusive and clearly defined. If not, you may face unexpected competition from other franchisees or even the franchisor operating nearby.
2. Renewal and Termination Rules
Franchise agreements typically run for a fixed term. Review whether you have the right to renew, and what happens if you want to exit early or if the franchisor ends the agreement. Some contracts allow termination with limited notice.
3. Ongoing Fees and Operating Costs
Beyond the initial franchise fee, you’ll often owe royalties, national marketing contributions, and possibly tech or support fees. These can add up quickly if you haven’t budgeted for them.
4. Non-Compete Clauses
Most agreements prevent you from operating a similar business for a set period after your franchise ends. That restriction may apply even if the business wasn’t profitable.
5. Legal Disputes and Limitations
Some contracts require arbitration or mediation instead of court. Others set legal jurisdiction in another state. This can impact how you handle disputes or seek resolution.
Understanding the legal terms of your franchise agreement helps you move forward with confidence. It’s not about avoiding risk completely. It’s about knowing what’s in the fine print so you can lead with clarity.
Before signing, talk to a franchise consultant who can help you evaluate the business fit and highlight areas worth discussing with a legal professional.