Everyone knows that location is “everything.” The same holds true for franchises. Opening a trampoline park in a retirement community is not a smart move, and most franchisees can spot places that are unsuitable for their new businesses. But aside from eliminating bad locations, picking a good location is not easy. New franchisees must understand what level of involvement they can expect from their franchisors, who presumably have good information on what works and what does not.
When it comes to site selection, there is an inherent conflict. Franchisors want their franchisees to succeed, so they want to make sure a proper site is picked. Franchisors typically know where their franchises are most successful, and this knowledge can usually benefit new franchisees. However, there is no guaranty that a particular location will be successful. Franchisors who ultimately select their franchisees’ locations or who furnish information regarding certain locations can find themselves in the firing line later if the site turns out to be poor.
Due to the risk of being blamed (i.e. sued), many franchisors are hesitant to actively pursue sites for their franchisees, or mandate that their franchisees open in a specific location. However, most franchisors understand that they need to remain involved in the process on some level. In this regard, many franchisors retain the right to approve sites proposed by their franchisees. This leaves the franchisor the right to veto any poor decision while distancing themselves from a potential failure by the franchisee due to poor site selection.
The level of franchisor participation varies greatly. However, franchisees should expect many disclaimers in their FDDs and franchise agreements regarding site selection. Regardless of how much assistance franchisors provide, they will almost always highlight that the risks inherent in site selection fall on the franchisee alone.
If you have any questions about this topic or any other franchise law issue, please contact Brian Loffredo at
ABOUT BRIAN LOFFREDO
Brian is a commercial litigator with more than seventeen years of experience representing clients in the franchise industry. Brian routinely assists clients during the licensing and franchise/FDD review process, as well as with the resolution of franchise-related disputes, including those involving terminations, territorial disputes, fraud, disclosure/relationship law violations and breaches of contract.
In addition, Brian represents and counsels clients in the construction industry on matters involving litigation, construction defects, licensing and compliance, collections, mechanic’s liens, payment bond and Miller Act claims, contract drafting, and compliance with home improvement laws and other construction industry laws.
Brian also has extensive experience representing financial institutions with workouts, collections and residential / commercial foreclosures.
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