Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

I ran across this informative article on whether you should hire a franchise broker to purchase a franchise via the Indiana Civil & Business Lawyer Blog. 

The article discusses how the Internet has changed the way people find a franchise.  With all the information available on the Internet it has produced "information overload" for prospective franchisees.  The Internet has paved the way for trusted intermediaries to sort through the morass.

The controversy is whether franchise brokers are trusted intermediaries.  As mentioned in the article it is important to remember that the franchise broker is not necessarily independent.  The brokers are paid a fee typically only if the sale is successful and brokers themselves usually do not represent all franchise opportunities.  Varying fees among franchises may encourage a broker to steer a prospective franchisee to one opportunity over another.

Other the other hand, I have had the good fortune to work with franchise brokers like Joe Cooney who are professionals and attempt to give objective information to prospective franchisees.  Professional franchise brokers will encourage you to conduct appropriate due diligence.  Professional franchise brokers will put your interests above their own.  Their long-term livelihood depends on that.  Not the one time sale. 

But nonetheless do your homework just like you would for any professional whether it be a business lawyer, accountant, real estate agent, financial representative, business broker, etc. 

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I have written in the past about Iowa Franchise Law and Territorial Encroachment.  Franchisees generally want an exclusive territory that is protected from encroachment by other franchisees or the franchisor's company owned stores.  But have you considered the impact of Internet retailing by the franchisor or other franchisees?

Be sure to review the territory provisions in the franchise disclosure document and franchise agreement with an eye toward whether the franchisor or franchisees are able to conduct Internet retailing.  In many instances franchisors will have a Web site but franchisees are not permitted to conduct online retailing.  While I am a big believer in the Internet for marketing and sales you will possibly suffer the consequences if a franchisor has a strong Internet sales presence.  Do you really have an exclusive territory if the franchisor conducts sales online?

Franchisors must also balance the possibilities of territorial enforcement with the need of franchisees to conduct online retailing.  This is where local search marketing comes into play.  Are there opportunities for franchisees to compete fairly online without cannibalizing each other? 

There are no easy answers when it comes to franchise Internet retailing but it should be a part of your decision making process in determining whether to buy a franchise.

Photo on flickr by aranarth

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