A franchising company must always be a Stickler for details when it comes to government licensing and compliance with Law of their franchises and franchised outlets. If a franchisee fails to comply with Law or secure the proper government licenses to operate their business it could become a public relations nightmare.
Not only must franchising companies monitor their franchises, they should also address this issue prior to the commencement of the franchise in the franchising company’s franchise disclosure documents and franchise agreements. It is for this reason that I added a clause into all of my franchising companies franchise agreements. Below you’ll find a clause;
3.24 Compliance with Law
3.24.1 Government Licensing
Franchisee will comply with all national, federal, state, regional and local laws and regulations pertaining to the operation of the Franchised Business and will timely obtain and maintain any and all permits, certificates, registrations, insurance or licenses necessary for the full and proper conduct of the Franchised Business. Franchisee will pay promptly, as they become due, all national, state, city and county licensing, registration and permit fees and charges in connection with the operation of the Franchised Business.
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Now then, you must consult your own franchise attorney to determine how best to address this issue for your company and to make sure that you are protected as a franchisor to insure the integrity of your brand-name. I hope you will consider this in 2006.