Click to Print

What are my rights if I purchased a franchise that didn't have a license in my state?

The franchise I purchased told me I didn't need a license to operate a small business. Now I'm paying big franchise fees with literally no support. Am I bound by the non-compete clause if I start a new business of my own under a new name?
Jeff Elgin answered January 21, 2010
URL: http://www.entrepreneur.com/answer/222043
It sounds like you have multiple challenges to deal with. First is the licensing issue--there are 14 states that require franchise companies to register with the state prior to selling franchises and if you are in one of those states and the company was not registered you have fairly strong recourse to try to get all your money back.

You also have issues with lack of support from the franchise company--though without reviewing the franchise contract it is not apparent what support was promised so this may be a breach of contract issue or it may just be a bad business practices issue.

Finally, it seems you would like to continue in the business as an independent operator but have a non-compete in place that may affect your ability or right to do so.

You need some good legal advice. My suggestion is that you contact an experienced franchise attorney and tell your story. Most attorneys will do the initial consultation with you for free and if your case is strong they will often take the case on a contingency basis if you can't afford to pay them up front for their assistance.

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.