Franchising can be an effective way for businesses to expand their brand and for entrepreneurs to enter a proven business model. However, both franchisors and franchisees in Texas must navigate a range of legal requirements to ensure compliance and protect their interests.

Understanding Texas Franchise Law

 Franchises in Texas are regulated under both federal and state laws. The Federal Trade Commission (FTC) enforces the Franchise Rule, which requires franchisors to provide a Franchise Disclosure Document (FDD) to prospective franchisees at least 14 days before signing an agreement. This document outlines essential information, including fees, obligations, and financial performance representations.

At the state level, Texas does not require franchise registration but still enforces laws related to fraud, misrepresentation, and the Texas Business Opportunity Act in certain cases. Contract terms, disclosures, and adherence to good faith and fair dealing remain critical.

Key Considerations for Franchisors

• Clear Franchise Agreements: The agreement should outline territory rights, fees, operational standards, and renewal terms.
• Trademark Protection: Protecting intellectual property ensures the brand’s identity is preserved.
• Compliance with Advertising Rules: All marketing and earnings claims must align with FTC guidelines.

Key Considerations for Franchisees

• Thorough Review of the FDD: Understanding costs, restrictions, and ongoing obligations before committing.
• Negotiating Terms: Some contract provisions, such as territory exclusivity or renewal rights, may be open to discussion.
• Ongoing Compliance: Adhering to operational standards is critical to maintaining the franchise relationship.

Dispute Resolution in Franchising

 Common disputes include termination, territory issues, and fee disagreements. Mediation or arbitration is often required under franchise agreements, and litigation may be necessary in serious cases.

At Manfred Sternberg & Associates, we assist both franchisors and franchisees in understanding their legal rights, drafting and reviewing agreements, and resolving disputes. Our goal is to help clients in the Stuart community protect their business interests while navigating Texas franchise law with confidence.