Franchising FAQ - Before a prospective franchisee signs the franchise agreement?

Date: March 04, 2011

Q. What searches should be done before a prospective franchisee signs the franchise agreement?

A. The franchisee's solicitor should perform a company search of the franchisor.  This will verify that the persons named in the disclosure document as directors and shareholders are in fact correct.  Another search is of the trademarks used in the franchise system.  Searches of intellectual property databases will identify who owns the trademarks.  There are implications where the owner of the trademarks and other intellectual property is someone other than the franchisor.  Other searches include bankruptcy searches of the directors and searches of court registers to ascertain whether the franchisor is involved in litigation.