Rush on Business

Trend Moving Toward Greater Protection for Franchisees?

With the recent passage of a new state law in Ohio and a new bill offering greater protection for franchisees in California, it will be interesting to see whether this growing trend of more pro-franchisee laws continues.

Interestingly enough it is Iowa that is often cited as a pro-franchisee state because of its franchise act. However, the growing economic market in Des Moines and throughout Iowa has not kept franchisors from establishing businesses in the state over the recent years. In my view, the opportunities for growth in Iowa far outweigh any negativity franchisors may have toward the Iowa franchise act.

But added protections for franchisees isn't necessarily a bad thing. Most franchise agreements are very one-sided in their terms and often have significant legal protections for the franchisors. You generally have a sophisticated business entity on one side (the franchisors) and less sophisticated people (the franchisees) on the other side. Most franchisees are small business people just looking to make a good living and may be investing their life savings into a franchise. Offering greater protections to franchisees should not hurt good franchise operators that deal fairly with franchisees. It will set them apart in the long run. Moreover, franchisees may feel more comfortable to go into franchise businesses.

So it will be interesting to see if the trend continues toward tougher franchise laws and the impact these laws will have on the industry.

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Rush Nigut l Brick Gentry, P.C. l 6701 Westown Parkway l Suite 100 l West Des Moines, Iowa 50266

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