How to Buy a Franchise in Minneanapolis

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How to Buy a Franchise in Minneanapolis

Before even buying a franchise it is very important to know what franchising is & what to expect.  It is of utmost importance to have a clear understanding of any business transaction one is getting into.

Generally, franchising is an arrangement between two parties, whereby the franchiser grants the franchisee to use its trademark or trade-name, in some cases, including business systems & processes, to produce & market a good or service in accordance with the franchiser’s specifications & standards.

How to Buy a Franchise in Minneanapolis

cheap franchiseAnyone who is considering to buy a franchise in Minneanapolis MN is strongly advised to exercise extreme caution.  One should have a clear understanding of the Minnesota Franchise Act that focuses on three (3) indicia (Circumstances that point to the existence of a given fact as probable, but not certain), to determine whether a real franchise relationship does exist.  These circumstances determine whether a business owner (franchiser) offering the sale of a business must follow certain regulatory steps in disclosing matters about it business before it is sold to a potential operator (franchisee).

These indicia are:

(1) A right granted by the franchisor to the franchisee to engage in business using the franchisor’s trademarks, trade name or trade dress.  In a franchise relationship,  the franchiser grants the franchisee to use its trademark or trade-name.

(2) A community of interest in the marketing of goods or service between the franchisee and the franchiser.  This is  a clear financial relationship between the franchiser and franchisee, often in the form of a royalty payment or through joint marketing efforts.

(3) A franchise fee paid by the franchisee to the franchiser.  The Minnesota courts have a very broad interpretation of franchise fee.  The courts look at franchise fee as a royalty payment made for the use of a franchiser’s system, or an initial fee for the right to enter into a business.  The courts may also look at franchise fees as fees for training or any charges for materials in running a business.  Minnesota law does provide a more broad scope of transactions entitled to franchise law protection than other states and has even provided protection for some distributorship relationships.

How to Buy a Franchise in Minneanapolis

In Minnesota, franchisers are required certain filings with the Minnesota Department of Commerce, which describes the business of the franchise, together with the standardized disclaimer requirements set by the North American Securities Administrators Association & adopted by Minnesota Administrative Rules.  These rules will protect potential franchise buyers in determining whether or not the franchise is a viable investment or not, because it strictly requires fairness in disclosure to avoid fraud on the part of the franchisers.  If franchisers fail to comply with the filings required, it may result to a court ruling by the courts for the franchisee to recover its costs for entering in to the franchise, any damages sustained & attorney’s fees & costs.

How to Buy a Franchise in Minneanapolis

So, if one is looking at getting a franchise in Minnesota, it is best to check with the Minnesota Department of Commerce to confirm the legality of the franchiser you are planning to buy a franchise from.

It is also best to get an advance copy of the Uniform Franchise Offering Circular (UFOC) & have a good lawyer review the agreement thoroughly.

How to Buy a Franchise in Minneanapolis

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How to Buy a Franchise in Minneanapolis

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