1734902608-3042-2589-lxb_photom5pz9D6MfUklxb_photo-
Riley McCullough, Unsplash

When Diego Pavia, currently a quarterback at Vanderbilt University, stepped off the JUCO field for the last time, he likely never imagined his name would headline one of the most talked-about court rulings in college sports history. Yet, here we are, with Pavia’s legal battle against the NCAA setting the stage for a seismic shift in the way student-athletes are treated and how eligibility will be determined. The story of how a scrappy quarterback took on the NCAA isn’t just about his fight—it could mean huge changes for JUCO athletes, college programs, and the entire ecosystem of collegiate athletics.

Pavia Challenged the NCAA-JUCO Eligibility Determinations

Pavia, like countless other JUCO athletes, dreamed of making it big. After an impressive stint at his junior college, he ended up have a great year at Vanderbilt, and proved he could compete with the best. He’s not considered a top NFL prospect though and wants to play another season at the D1 school. But the NCAA had other plans. Pavia was ruled ineligible to play for the 2025 season because his time at a junior college was counted as part of the four seasons of intercollegiate competition allowed within five years, even though JUCO schools are not NCAA members. The NCAA counted time spent at a junior college as part of the four seasons of intercollegiate competition allowed within five years, even though JUCO schools are not NCAA members.

In the past, this would have been the end of the road. Many athletes have lacked the resources or the time to fight the NCAA’s rulings. But we are in the NIL age where college athletes now have significant resources at their disposal. Plus, Pavia wasn’t just any athlete. As a starting D1 QB in the SEC, this is a livelihood decision. With the help of his tenacious legal team, he decided to challenge the NCAA’s decision.

Times Have Changed for the NCAA and College Athletics

The NCAA isn’t just an organization; it’s an empire. With decades of precedent, deep pockets, and a well-oiled legal machine, they’re not accustomed to losing. For Pavia, going up against the NCAA is like trying to run through the Georgia defense with no blocking. His lawyers argued that the NCAA’s eligibility requirements were not only outdated but fundamentally unfair, disproportionately affecting athletes from JUCO programs and smaller schools. They also emphasized that denying Pavia eligibility would cost him the opportunity to earn over $1 million in NIL deals and build his personal brand as the starting QB at the SEC school.

The NCAA countered with their usual playbook: maintaining that their rules are necessary to ensure fairness and integrity in college sports. They pointed to the “slippery slope” argument, claiming that overturning Pavia’s ineligibility would open the floodgates for other athletes to demand exceptions, including players seeking seven-year collegiate careers by combining JUCO and Division I play.

Pavia’s team painted a picture of a system that punishes the very athletes it claims to protect. The NCAA, in turn, tried to frame the case as an attack on the sanctity of their rules. But Chief U.S. District Judge William L. Campbell saw it differently. He referred to Division I football players as a “labor market,” recognizing that they provide services in a commercialized manner akin to professional athletes. He also recognized the JUCO experience is not anything like the D1 experience for these athletes.

A Game-Changing Ruling

In a ruling that sent shockwaves through the sports world, the court sided with Pavia. The judge granted an injunction, allowing him to play in the 2025 season. More importantly, the ruling set a precedent that could reshape the landscape of college sports.

For JUCO athletes, the implications are enormous event though the current ruling only applies to Pavia. The ruling acknowledges the systemic disadvantages they face and opens the door for more athletes to challenge the NCAA’s decisions. It also puts pressure on the NCAA to revisit their eligibility requirements.

But the ripple effects go beyond JUCO players. College programs are now on high alert, realizing that their recruitment strategies and roster decisions could be impacted by similar legal challenges. The ruling also emboldens athletes across all levels to advocate for themselves, knowing that the courts may be willing to intervene.

What’s Next?

The modern college sports landscape increasingly resembles professional sports, with players engaging in endorsement deals, sponsorships, and other commercial transactions. Campbell’s ruling indicates that eligibility rules denying players the chance to compete and earn NIL opportunities could face intense antitrust scrutiny, especially since such rules are agreements among NCAA member institutions that restrain competition in a labor market.

The NCAA now faces a choice: double down on their outdated rules or embrace the wave of change that athletes like Pavia are demanding. Either way, one thing is certain—college sports will never be the same.

As for Diego Pavia, he’ll suit up in 2025 with the opportunity to secure seven-figure NIL deals and a renewed sense of purpose. His victory has already inspired other athletes to file similar lawsuits, aiming to capitalize on the precedent he set or to pressure the NCAA into revising its rules. One thing is clear: the landscape of college athletics is undergoing a dramatic transformation, and the era of rigid control by the NCAA is giving way to a new, uncharted frontier.

Black and red flags against a blue sky
Christer Ehrling, Unsplash

Not all franchise opportunities are worth the risk.

Franchising has become a popular path to financial independence, promising a proven business model and support from an established brand. With over 15,000 new franchise units expected to open annually, it is easy to get swept up in the excitement of becoming your own boss. However, not all franchises deliver on their promises, and the consequences of a bad investment can be devastating.

For many, buying a franchise is one of the largest financial commitments of their lives, often involving life savings or a significant loan. The stakes are high, which is why it is critical to go beyond the glossy marketing materials and dig deeper into the franchise opportunity. The success—or failure—of your investment hinges on your ability to spot red flags early and make an informed decision.

So, how do you separate the winners from the losers? It starts with understanding the red flags that could derail your franchise journey.

Why Red Flags Matter

Franchising offers undeniable benefits if done right: a recognized brand, a proven system, and ongoing support. But these advantages vary widely from one franchisor to another. While some brands prioritize franchisee success with robust systems and transparent operations, others operate with little regard for the people investing in their business.

A solid franchise system includes detailed training programs, ongoing operational and marketing support, and a collaborative relationship between franchisor and franchisee. When these elements are missing, it is a sign the franchisor may not have your best interests in mind.

Unfortunately, the shiny promise of owning a franchise often blinds buyers to the potential pitfalls. This is why it is crucial to approach every franchise opportunity with skepticism and a commitment to thorough due diligence.

Spotting the Red Flags

The Franchise Disclosure Document (FDD) is your first line of defense. This document, required by law, contains critical information about the franchisor’s business practices, financial health, and obligations to franchisees. However, the FDD can also reveal glaring red flags that are easy to miss if you do not know where to look. Franchise Wire had a good article with an expert panel that discussed these red flags and provided some helpful advice.

Jamie Davis of ApplePie Capital advises starting with FDD Item 3, which outlines the franchisor’s litigation history. Multiple lawsuits involving franchisees could signal a toxic culture or poor relationships between the franchisor and its partners. Next, focus on Item 20, which provides data on franchise openings, closures, and projected growth. A high closure rate could indicate trouble.

Another critical step is speaking with current and former franchisees. Justin Waltz of The Junkluggers highlights the importance of transparency: “Legitimate franchisors should be able to provide clear, detailed financial information to demonstrate how they generate revenue and reinvest in the business to enhance the franchise owner experience.” If a franchisor refuses to provide such information, consider it a red flag.

Other warning signs include:

  • High turnover rates: If franchisees are leaving the system in large numbers, there is likely a deeper issue with the business model or support system.
  • Unrealistic financial projections: Be wary of franchisors that promise outsized returns without providing evidence to back up their claims.
  • Insufficient training and support: Aaron Harper of Rolling Suds warns against franchisors that scale irresponsibly without the infrastructure to support new franchisees.

A successful franchise relationship is built on trust and mutual success. Jake Feury of Stretch Recovery Lounge emphasizes that the best franchisors care about your success more than their own profits. If you sense that the franchisor prioritizes their own gain over helping franchisees succeed, walk away.

The Resolution: Do Your Homework

So, how do you avoid these pitfalls and find the right franchise opportunity? It all comes down to preparation. Here are the steps you should take:

  1. Scrutinize the FDD: Pay special attention to Items 3 and 20 as mentioned above, but do not stop there. Review the entire document, or better yet, work with a franchise lawyer to ensure nothing is overlooked.
  2. Validate with Franchisees: Speak to at least five current and former franchisees. Ask about their experiences with the franchisor, the level of support they received, and whether they would make the same investment again.
  3. Trust Your Instincts: Harvard Business Review suggests that combining gut feelings with analytical thinking leads to better decisions. If something feels off, investigate further.
  4. Evaluate Support Systems: Stacey Heald of Pvolve underscores the importance of robust support, including training, marketing, and operational guidance. Ensure the franchisor has a team dedicated to helping franchisees succeed.
  5. Look for Transparency: A good franchisor will have nothing to hide. If they are unwilling to share detailed financial information or avoid answering your questions, consider it a dealbreaker.

Closing Thoughts: Protect Your Investment

As a franchise lawyer, I have seen both the successes and the failures in franchising. The difference often comes down to preparation and asking the right questions. Franchising can change your life—but only if you invest with your eyes wide open.

Do not rush the process. Take your time, do your homework, and trust your gut. It is far better to walk away from a bad deal than to get stuck in a partnership that does not support your success.

Franchising offers incredible potential, but only if you choose wisely. The power is in your hands.

Businessman opening a paper
Adeolu Eletu, Unsplash

Franchising is booming.

Private equity firms are snapping up franchisors faster than ever. Recently, we have seen Jersey Mike’s secure a massive $8 billion private equity deal and Freddy’s Frozen Custard and Steakburgers now reportedly exploring a sale. The stakes are high, the money is flowing, and the pace of change is staggering.

But here is the catch: your Franchise Disclosure Document (FDD) due diligence and franchise agreement review have never been more critical.

The Allure of Franchising

Franchising has always been a unique path to entrepreneurship. For aspiring business owners, it offers the ability to plug into a proven system, leverage brand recognition, and access the support of an established organization. That is why savvy investors and budding entrepreneurs alike flock to franchises, hoping to stake their claim in a growing market.

This appeal is amplified in the current landscape. Private equity sees opportunity, and for good reason. These firms excel at scaling businesses, refining operations, and driving returns. When private equity enters the picture, growth often accelerates—but so do risks for franchisees.

It is a high-stakes game.

The Problem Nobody Talks About

Here is one rule to live by: never rely on oral promises from a franchisor.

Why? The franchisor you shake hands with today might be sold to private equity tomorrow. And let me be clear—private equity has zero obligation to honor any handshake deals.

Imagine this: You meet with your franchisor’s representative, and they promise you exclusive territory rights or flexible payment terms. It feels great. You trust them. But that promise does not make it into the franchise agreement. Six years later, private equity steps in, restructures operations, and invalidates any unwritten assurances.

Legally, they can do that. And ethically? That is up for debate.

In fact, even before such a sale, most franchisors’ lawyers will flat out say: “If it isn’t in the agreement, it doesn’t exist.”

Let that sink in.

The Solution is in the Details

This is why your FDD and franchise agreement are tools for protecting yourself.

The FDD is your roadmap. It details the franchisor’s financial health, legal history, obligations to franchisees, and—most importantly—your rights as a franchise owner. Yet many franchisees skim it or, worse, rely on a franchisor’s verbal reassurances.

Do not make that mistake.

Scrutinize the franchise agreement, too. This document is the final word on your relationship with the franchisor. Every promise, every protection, every potential risk must be spelled out in black and white. If it is not, you are exposed.

And let us be real: in this booming M&A environment, your diligence is not just about understanding the deal you are signing—it is about anticipating the deal the franchisor might sign tomorrow. Private equity firms are not in the business of protecting legacy relationships; they are in the business of maximizing returns.

That means everything from royalties to operational requirements could change once they are in charge. If your agreements are vague or reliant on good faith, you are the one left holding the bag.

Protect Yourself

Here is the bottom line: in franchising, what is written in ink is what stands. Everything else? It is just noise.

The private equity boom is not slowing down, and neither is the pace of franchising M&A activity. As an entrepreneur, you must rise to the occasion. Read the FDD. Scrutinize the franchise agreement. Seek expert guidance such a franchise lawyer and accountants.

Because in this high-stakes world, your due diligence is not just a box to check—it is the shield that protects your investment.

Franchising is booming.

Are you ready?

1733266023-3032-9944-lxb_photodJdcb11aboQlxb_photo-
John Matychuk, Unsplash

A Texas court has issued a nationwide preliminary injunction against the Corporate Transparency Act and the “Reporting Rule” implementing it. The judge stated in his ruling that the Act and the Reporting Rule are likely unconstitutional and the compliance deadline of the end of the year is stayed.

Read the full Order from the Judge here.

1733090579-3028-6610-lxb_photo5nk3wSFUWZclxb_photo-
Ben Hershey, Unsplash

In sports, the little things are often the difference between winning and losing.

At Brick Gentry, we have extensive experience in providing legal services for professional athletes, college athletes, and universities. From contract review to drafting agreements, including those covering Name, Image, and Likeness (NIL) rights, our goal is to ensure that our clients are protected.

The rise of NIL has transformed college athletics, but it has also created chaos. Athletes leave programs with claims of unfulfilled promises, and fans are often left angry and confused. The common thread? A lack of clear, enforceable written agreements. A handshake deal might work on the golf course, but in the highly visable world of sports, it is a recipe for disaster.

This is where we come in.

We have also seen firsthand that professional athletes often rely solely on their agents to handle contracts. While many agents are incredible dealmakers, their expertise surprisingly does not always extend to safeguarding the athlete’s long-term interests, intellectual property, or legal rights. That is where legal representation becomes a game-changer.

Athletes deserve more than just a great deal. They deserve a contract that works for them.

As we expand our practice, we will continue to tackle pressing sports and entertainment issues, sharing insights on topics like NIL, intellectual property rights, and contract disputes. Of course, we will also keep writing about core areas of practice like franchise and general business matters—because winning in business requires the same level of preparation as winning in sports.

Protect your future.

Because champions pay attention to the details—and we have found that details make a huge difference when it comes to sports and entertainment contracts.

1733087914-3024-3609-lxb_photom5pz9D6MfUklxb_photo-
Riley McCullough, Unsplash

In the summer of 2021, the NCAA implemented a groundbreaking policy. For the first time in the tenure of college athletics, student-athletes were permitted to earn income from their name, image, and likeness. This process of college athletes earning income has become commonly known as “NIL.” While many believed this rule was the change necessary to balance the inequities between student-athletes and the coaches and universities, NIL has had other effects and has drastically changed the landscape of college athletics.

NIL was intended to provide athletes with an opportunity to monetize their personal brands and earn income throughout college. To earn NIL funds, student-athletes can engage in various business-like activities, including social media influencing, public speaking, autograph sessions, training camps, lessons, or other promotional activities and appearances. One key aspect of NIL is that student-athletes must actively participate in one of these activities – a student’s NIL earnings cannot simply be passive income. Further, NIL is not to be used as a recruiting tool despite the relationship between these opportunities and certain colleges or universities. This means that coaches and universities are prohibited from offering NIL packages to new recruits. While they can highlight NIL opportunities and endorsements that current athletes have, outright offering a recruit or transfer student a sum of money to attend that university is disallowed and inconsistent with the very purpose of NIL. Regardless of the regulations in place, universities and athletic programs are increasingly leveraging NIL to attract high school recruits and transfer students. This practice raises ethical questions about the true purpose and function of NIL and whether it undermines the integrity of amateurism in college athletics.

In today’s world of college athletics, incoming high school students and transfer students have NIL valuations and payments dangled in front of them before committing to a university and without having participated in any sort of required business-like activity. For example, in June 2024, while welcoming football recruits to campus, the University of Texas lined the entryway to their athletic facilities with a “fleet” of Lamborghinis from a local dealership and university NIL partner. While this elaborate show of NIL wealth may not have been an explicit offer to recruits, it almost certainly straddles the line of an impermissible use of NIL in recruiting. Another example of NIL in the recruiting process comes from a recent Sports Illustrated article. It has been reported that the University of Michigan is offering a five-star football recruit upwards of $5 million to attend the university. The complete lack of oversight by governing bodies has allowed universities to use NIL as a means of enticing student-athletes with large amounts of money without ever performing a public appearance, autograph signing, etc. – and in many scenarios, long before the recruit has developed a “brand” of their own, the intended profit driver behind NIL.

In addition to NIL being used outside of its intended means, it has also radically shifted the power dynamic between coaches and student-athletes. Most recently, in September 2024, two football players from UNLV decided to sit out the remainder of the college football season after leading their team to a 3-0 start. According to the University, the players made certain demands of the University’s NIL collective. Conversely, the players alleged that the University failed to follow through on NIL commitments it made (likely impermissibly under NIL regulations) to the athletes when they were recruited to the University. This type of situation is exactly what some critics of NIL feared—universities could sell snake oil to recruits by telling them they could get rich by playing there, or athletes could make unreasonable demands on their school’s NIL funds without participating in the necessary activities. Regardless of which account is true, NIL has created a dangerous dynamic of “pay for play,” something the NCAA had intended to avoid.

One way to address this issue is for universities and collectives to establish clear, enforceable written contracts with athletes. These contracts should outline specific NIL activities required of the athlete and define payment structures that ensure both parties meet their obligations. Such agreements can reduce disputes by eliminating ambiguity and ensuring that athletes understand their commitments. Additionally, these contracts should include provisions that encourage athletes to complete at least the current season before redshirting or transferring to another program, especially in team-centric sports like football. By implementing these safeguards, universities can maintain team cohesion and ensure that NIL agreements uphold the broader goals of fairness and integrity in college athletics.

NIL funds have truly transformed college athletics into the Wild West—a perplexing mix of ethical questions and legal gray areas. The NCAA has rules in place but is yet to strictly enforce them. Moving forward, it is imperative that the NCAA, along with universities and collectives, find ways to balance opportunities for athletes to benefit from their name, image, and likeness while preserving the integrity and spirit of college athletics. Written contracts could serve as a critical tool in achieving this balance, offering transparency and accountability in an increasingly complex system.

* This post is a guest post written by our associate attorney, Luke Zielinski. Luke and I share a love of sports and entertainment law issues. At Brick Gentry, Luke offers services in areas including corporate and general business transactions, mergers and acquisitions, and real estate and municipal matters. His dedication and passion for his work allows him to help guide clients and create innovative solutions to intricate legal issues.  

As you leave Slab City (a 'free community' east of the Salton Sea) you see this painted, now defunct, guard shack. Colorful and funny.
Donald Giannatti, Unsplash

I recently took a call from someone eager to buy a restaurant franchise.

They were excited, optimistic, and ready to take the plunge. The idea of owning their own business, working for themselves, and controlling their destiny had them fired up. They had done some research, run the numbers, and figured they were ready to roll. But there was one glaring issue.

They had zero restaurant experience.

Now, I could have leaned into their enthusiasm, gone along, and reassured them that everything would work out. That would have been easy. It would have made them feel good. And honestly, it would have made me feel good too and allowed me to earn a nice fee. After all, who does not want to be the person who helps someone chase their dream?

But that is not my job.

My job is often to help people avoid making significant mistakes. Especially when those mistakes could cost them hundreds of thousands of dollars and years of their life.

So, I did what I always do in these situations. I told them the truth.

The Reality of Owning a Restaurant Franchise

I shared what I have learned from years of working with clients in the restaurant industry. I talked about the challenges with employees—constant turnover, the difficulty of finding good managers, and the endless HR headaches. I explained the high failure rates in the restaurant business, even for franchise owners. And I was honest about the time-consuming nature of managing such a business. Owning a restaurant is not a part-time gig or a side hustle. It is a lifestyle. A demanding, often overwhelming lifestyle.

And I told them something they probably were not expecting to hear: without any prior restaurant experience, they were potentially walking into a firestorm.

The numbers might look good on paper. The franchisor might be promising the world. But the reality on the ground is very different. It is tough. It is risky. And for someone without a background in restaurants, it can be downright brutal.

Why Tough Conversations Matter

This is not an easy conversation to have. When someone calls me, they are often looking for validation. They want me to confirm what they already believe—that their plan is solid, their dream is achievable, and they are ready to move forward.

But here is the thing: my job is not to validate someone’s feelings. My job is to protect their future.

That means I often have to tell people what they need to hear, not what they want to hear.

And sometimes, they do not want to hear it.

But tough conversations like these can save people from making life-altering mistakes. They can save marriages, retirement accounts, and years of regret. Because the truth—while it might sting in the moment—is far better than a sugar-coated lie that leads someone straight into disaster. Even if it means I lose a fee.

The Role of a Lawyer as a Guide

When you work with a franchise or business lawyer, you should want to hire someone who does more than just dot the i’s and cross the t’s on your legal documents. You are hiring someone to guide you through some of the biggest decisions of your life.

For me, that means using my experience—not just as a franchise and business lawyer, but as someone who has worked with countless clients in industries like restaurants—to provide real, honest advice. It means looking beyond the shiny marketing materials and digging into the hard truths. It means being the person who raises their hand and says, “Have you really thought this through?”

In this particular call, the prospective client thanked me giving them a lot to think about. They admitted they had not considered many of the challenges I mentioned. And while they were still interested in pursuing the franchise, they walked away from the conversation with a clearer understanding of what was ahead.

That is the goal.

It is not about crushing dreams. It is about making sure those dreams are rooted in reality.

Why Honest Advice is a Must

Too many people surround themselves with yes-men. They chase ideas without ever stopping to question the risks. And when things go south, they are left wondering why no one warned them.

But here is the thing: the warning signs are almost always there. You just need someone with the courage to point them out.

That is where I come in.

When you hire me, you are not hiring someone to tell you what you want to hear. You are hiring someone to tell you what you need to hear. Even if it is uncomfortable. Even if it makes you pause. Because at the end of the day, it is far better to have a tough conversation upfront than to deal with the fallout of a bad decision down the road.

The Bottom Line

The truth is not always easy to hear. But it is always worth it.

That is my promise.

If you are ready for someone who will put honesty above your feelings, let’s talk. Because sometimes, what you need most is someone who will tell you the hard truth—and then help you figure out where to go from there.

That is what I do.

Berkeley Communications phone call
Berkeley Communications, Unsplash

In an era of increasing sophistication in scams, fraudsters have found a new tactic: exploiting real business names and lawyer identities, likely scraped from Secretary of State websites or public records, to bolster their credibility. This scheme not only tarnishes reputations but also endangers unsuspecting victims who may unknowingly engage in fraudulent dealings.

I recently uncovered such a scam involving one of my clients’ business names. Fraudsters are falsely claiming to represent this business and, disturbingly, falsely naming me as their attorney. Their ruse? Pretending to be brokers searching for rental properties for high-profile events, such as PGA tournaments, including an upcoming event in Puerto Vallarta.

This scheme is particularly alarming because it blends legitimate-sounding business dealings with fabricated documents and legal representation. By using the names of real businesses and lawyers, scammers make their operations appear credible and professional, luring in their victims with carefully constructed lies.

How to Protect Yourself

Here are a few steps you can take to stay vigilant:

  1. Verify Credentials: Always independently verify the identity of businesses, brokers, and attorneys involved in a transaction. Cross-check their contact details with official websites or directories. In the instances of the recent scammers using my client’s business name, a couple of the people contacted avoiding being a victim by calling our office. We were able to verify we were not involved and that it was a scam.
  2. Be Wary of Unsolicited Offers: If you are approached with a seemingly lucrative or urgent opportunity, take the time to investigate its legitimacy thoroughly. Think: would a legtimate business contact me in this manner? If it feels wrong, it probably is wrong.
  3. Scrutinize Documentation: Look for inconsistencies, odd wording, or formatting in contracts or correspondence. A professional review can often reveal red flags.
  4. Report Suspicious Activity: If you suspect fraud, notify the business or lawyer whose name is being misused and report the scam to local authorities or consumer protection agencies. It is very hard to catch these scammers because most of them reside outside the country, but it is good to provide information to authorities so they can get information out about the scams.

A Personal Note

This particular incident was not on my bingo card for the year. Seeing my name falsely attached to such a scam is unsettling, but it reinforces the importance of diligence and transparency. By staying informed and cautious, we can collectively minimize the damage caused by these bad actors.

Remember, if something feels off, trust your instincts. Stay vigilant!

Feel free to share this post to raise awareness and help others protect themselves.

White neon wallpaper
Austin Chan, Unsplash

A client recently asked for my thoughts on a new franchise they are considering.

When it comes to franchising, there is a unique allure to being one of the first. You imagine the chance to “get in on the ground floor,” to ride the wave of a promising new concept. But investing in a new franchise also comes with risks—a lack of history, unproven systems, and uncertainty about long-term potential.

Before diving in, you need to evaluate the opportunity through a clear, strategic lens. Here are five key factors I recommend focusing on.

1. Market Demand

The first question is the most critical: Is there a real, unmet demand for the product or service, or will you need to build the market from scratch?

Established franchises often succeed because they tap into a proven demand. A new franchise, however, can be a gamble. Ask yourself: Does the franchise solve a problem people already have? Are customers searching for this type of offering, or is it so novel that you will need to educate them first?

For example, a niche fitness concept might thrive in certain demographics but struggle in others. Research your local market. Talk to potential customers. Analyze whether the product or service fills a void in your community—or if it risks becoming a “solution looking for a problem.”

If the demand exists, you are halfway there. If it does not, prepare for an uphill battle.

2. Profitability

A franchise’s potential profitability is another vital consideration. This is where many new franchisees fall into the trap of optimism.

Even for new franchises, the franchisor should have piloted their concept with multiple successful locations. Are they profitable? If so, how long did it take to break even?

Do not just take the franchisor’s word for it—dig deeper. Review the Franchise Disclosure Document (FDD) to see if it includes an Item 19 Financial Performance Representation. If the franchisor has chosen not to provide financial projections, proceed with caution.

A new franchise may promise profitability, but without proof, it is just speculation.

3. Support and Training

Even the best franchise concept can fail without proper support and training.

A strong franchisor knows the importance of equipping their franchisees with the tools for success. For new franchises, the system may not yet be as polished as that of an established brand. Your job is to assess whether the existing training and support are sufficient—or if you will be left to figure things out on your own.

Here are some questions to ask:

  • What does the initial training program include?
  • Is there ongoing support, such as field visits or regular check-ins?
  • Are there clear processes for marketing, operations, and customer service?

The franchisor’s willingness to invest in your success is often the best indicator of their long-term commitment. If they seem disorganized or dismissive, that is a red flag.

4. The Franchise Disclosure Document (FDD)

The FDD is your roadmap to understanding the franchise opportunity. A thorough, transparent FDD signals a franchisor that values trust and clarity.

Review it carefully, focusing on key sections such as:

  • Initial fees and ongoing royalties
  • Obligations of both the franchisor and franchisee
  • Restrictions on suppliers or operations
  • Termination and renewal terms

Are the terms fair and reasonable? Is there room for negotiation?

Hire a franchise attorney. The FDD is long and complicated, but missing a critical detail could cost you in the future.

5. Franchisee Experience

Even if the franchise is new, there should be a few early adopters. Their experiences can offer invaluable insight.

Request a list of current franchisees from the franchisor, and make it a priority to reach out to them. Ask about their experience with:

  • The onboarding process
  • Day-to-day operations
  • Profitability and timeline to break even
  • The quality of franchisor support

Sometimes these conversations reveal what the marketing materials do not. Pay attention to their tone and willingness to share details—if they seem reluctant or dissatisfied, it may be a warning sign.

Final Thoughts

Investing in a new franchise can be a rewarding journey, but it is not for the faint of heart. The lack of an established track record means you are relying on your due diligence to uncover potential risks and rewards.

Take your time. Ask tough questions. And remember, you have more power than you think. Franchisors need early adopters, and this gives you leverage to negotiate terms that protect your investment.

The best franchise decisions are not made on excitement alone—they are made with strategy, foresight, and a willingness to walk away if the fit is not right.

Do your homework.

And when the right opportunity comes along, you will know.

EXIT
Dongki Koh, Unsplash

Exiting a failing franchise is not easy.

When a franchise struggles to deliver expected returns, franchisees often wonder if they can negotiate an exit from their ongoing obligations, especially the requirement to continue paying royalties. Franchise agreements are complex, one-sided documents that make severing ties without repercussions challenging. Many franchisees quickly discover that the franchisor holds considerable leverage, with limited contractual obligations to provide ongoing support. Breaking free from such an arrangement requires more than a good strategy. It requires collaboration, careful documentation, and a willingness to understand the franchisor’s perspective.

Franchise Agreements: A Reality Check

Most franchise agreements are designed to protect the franchisor. These contracts are structured to preserve brand integrity, ensure a steady revenue stream through royalties, and give the franchisor control over the brand experience. For franchisees, this often means accepting a framework that prioritizes consistency over individual flexibility. Unlike independent businesses, franchisees are bound by brand standards, approved suppliers, and sometimes even local marketing mandates. Some franchisees thrive within these guidelines, while others struggle to find profitability despite their best efforts.

The structure of these agreements compounds the challenges of exiting. Ongoing royalty payments—typically a percentage of gross sales—remain a contractual obligation even when a franchise underperforms. Franchisors rely on these royalties as a primary revenue stream and rarely waive them lightly. Franchisees hoping to escape royalty payments must either work collaboratively with the franchisor or prepare for the daunting possibility of a costly legal battle.

Why Collaboration Is Key

Franchisors generally do not want to see franchisees fail. A failing franchise reflects poorly on the brand and discourages potential investors. Approaching the franchisor with a collaborative mindset is critical. Franchisees who present themselves as partners in resolving the issue are more likely to engage in productive discussions. Suggesting potential solutions, such as transferring the franchise to a new owner, temporarily reducing royalty rates, or exploring a reduced lump sum payment to exit, can open a path that satisfies both parties.

The importance of a cooperative approach cannot be overstated. Franchise litigation is a costly and lengthy process. Franchisors are often prepared to handle legal disputes with internal legal teams. Franchisees, however, may find themselves at a disadvantage due to the time and expense involved. Moreover, courts often enforce franchise agreements as written, giving the franchisor a significant advantage. Rather than choosing an adversarial route, franchisees are often better served by engaging in open, solution-oriented dialogue.

Key Considerations Before Approaching the Franchisor

Before initiating discussions with the franchisor, franchisees should evaluate several key considerations that can influence their negotiating position. These considerations clarify what is realistic and achievable, allowing the franchisee to approach the conversation with preparation and insight.

  1. Assess the Potential for Sale
    The first option is determining whether the franchise could be sold to another franchisee or new investor. Franchisors may support a sale if it presents a viable alternative to terminating the franchise agreement. Franchisees should evaluate the market for potential buyers, prepare financial statements reflecting the actual performance, and determine whether a sale could offset some losses. If a sale is possible, it may allow the franchisee to transition out of the business without further financial entanglements.
  2. Document Financial Losses
    Franchisors are more receptive to negotiating exit terms when they understand the full extent of a franchisee’s losses. Providing well-documented records demonstrating sustained financial challenges over a reasonable period can help build a case for relief. Revenue reports, expense statements, and financial records that highlight ongoing challenges can convey that underperformance is due to market conditions or structural issues rather than poor management.
  3. Outline Attempts to Improve Performance
    Franchisors expect evidence that franchisees have made good-faith efforts to improve their bottom line. Document any initiatives to boost sales or reduce expenses, such as marketing efforts, operational changes, or consultations with franchisor-provided support. Showing multiple strategies have been tried but failed adds weight to the request for relief or exit.
  4. Consider Financial Impact on the Franchisor
    Franchisees should recognize that royalties are part of the franchisor’s revenue structure. These payments may feel burdensome, but from the franchisor’s perspective, they are not optional. Franchisees proposing a win-win scenario, such as a temporary royalty reduction or a lump sum settlement payment, may find the franchisor more open to negotiation. By empathizing with the franchisor’s financial considerations, franchisees can demonstrate a cooperative spirit and increase the likelihood of a favorable solution.

The Path Forward

Exiting a poor-performing franchise is neither simple nor guaranteed. It requires franchisees to approach the situation with patience, preparedness, and a clear understanding of the franchisor’s perspective. While the path is challenging, those who adopt a collaborative mindset and come armed with documentation, insights, and realistic proposals stand a better chance of negotiating favorable terms.

A collaborative approach benefits both the franchisee and the franchisor. Franchisees gain an opportunity to exit gracefully, while franchisors preserve brand integrity and avoid the costs and reputational risks of litigation. When franchisees see themselves as partners with the franchisor in resolving the situation, the process becomes more manageable and far less daunting.

Preparation and cooperation make all the difference.