Despite all the economic turmoil in other states, Florida is still a thriving environment for franchises. According to the International Franchise Association data, the state had over 59,000 franchise establishments in 2020, with a total payroll of $26.4 billion.
Accordingly, it is fundamental for both parties involved in the franchising business – franchisors and franchisees – to know franchise laws in Florida.
This article will find out all you need to know about Florida franchise laws in 2021.
Back to Basics – What is Franchise Business?
Franchising is a distribution of products/services between a franchisor, who is responsible for establishing a brand with a trademark and a business system, and a franchisee, who pays for the licensing rights to use the franchise’s trade name and system.
Undoubtedly, franchises can be a profitable business, especially in an attractive business environment like Florida. However, franchisors and franchisees must stay fully compliant with all state laws regarding franchise business.
In Florida, franchise law provides the legal parameters for franchise businesses, outlining all essential rights and responsibilities of franchisors and franchisees. Also, the state legislation enforces common law to protect both parties involved in a franchise business relationship.
Franchise Laws in Florida 2021 – Franchisee Rights
Typically, franchisors are the real owners of the business system of the franchise, including the brand, intellectual property, know-how, and everything else. Thus, franchisees tend to be more exposed to be treated as the “weakest link” in their business relationship.
However, in this sense, franchise law in Florida has several provisions that protect franchisees. Firstly, franchisors cannot engage in unfair business practices or unconscionable activities that damage the other parties in a business relationship or the public.
State law also provides that franchisors and other suppliers cannot force a franchisee to either order or accept merchandise or equipment under coercion. State law also prohibits forced buying of products containing unwanted features or any additional equipment that is unwanted.
Plus, franchisors are prohibited to improperly withhold supplies or other products from franchisees in a manner that would harm the franchisee’s financial well-being.
Franchise Laws in Florida 2021 – Franchise Agreements
In the franchise business, every franchisor and franchisee must follow strict guidelines provided in the franchise agreement. A franchise agreement is a legally binding document containing both parties’ expectations in their business relationship.
Even though a franchise agreement is a mandatory contract in any franchise business, there is no standard form for such a document. Each franchise has different systems and operation methods, which directly affect the terms and conditions of each agreement.
Negotiating a franchise agreement is not an easy task, especially as franchisors tend to secure their interests throughout the process. Hence, it is crucial to be assisted by an expert business attorney during the negotiation and drafting of any franchise contract.
Among other provisions, a franchise agreement will lay out the franchise’s territory size, the franchisee’s right of renewal, the existence of restrictive clauses (e.g., non-compete agreement), and minimum performance requirements.
Franchisees must pay attention to terms regarding personal guaranty. Franchisors largely use these terms to obligate franchisees to secure their monetary and non-monetary obligations in the contract individually.
There are situations in which a personal guaranty permits the franchisor to act against a franchisee, including requirements for the franchisee’s spouse to sign the franchise contract.
Consequently, it is crucial to work with an expert business attorney before, during, and after the negotiation to acquire a franchise.
Franchise Laws in Florida 2021 – Employees at Franchises
Traditionally, franchisees used to be considered the direct employers of employees working at each franchise. Nonetheless, recent decisions at the federal level provided that such employees may be employees of the franchisor.
In 2014, the National Labor Relations Board held that the McDonald’s company would be jointly liable for the working conditions of its franchisees’ employees.
However, this was a controversial decision, especially after several federal courts nationwide had not agreed with the new interpretation. This situation demonstrates why the guidance of an expert business attorney is crucial for both franchisors and franchisees.
Do You Need to Deal with Franchise Laws in Florida? – We Can Help You
Even though Florida is a thriving place for franchise businesses, setting up a franchise in the state is still a complex task. However, there is no need to worry if you have the guidance of an expert lawyer from Attorney Romy B. Jurado Esq.