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In January 2014, the International Franchise Association released its Franchise Business Economic Outlook for 2014, a report that gathers important data from various sources in order to make projections about the state of the U.S. franchise sector. The IFA expresses cautious optimism for franchise growth across the country in 2014, citing likely increased consumer spending and other positive economic markers.

Franchises by the numbers in the new year

In particular, the IFA predicts that in 2014 some basic numbers are going to go in the right direction:

  • The number of franchise units in the U.S. will rise by 1.7 percent.
  • Franchise employment will increase 2.3 percent.
  • The dollar output of franchise establishments will grow by 4.7 percent.
  • The gross domestic product or GDP of the franchise sector of the national economy will rise to $493 billion, representing about 3.5 percent of the entire U.S. GDP.

So any New Jerseyan who has been mulling the idea of becoming a franchisee may want to look seriously at whether this is the year to start up a franchise in the Garden State.

Franchise basics

A franchise is a business with the right to market a particular brand of service or good, usually in a particular location. The brand is owned by the franchisor who grants by contract to the franchisee the right to use the brand and related business concepts in a local branch of the business. Familiar franchises include McDonald's, Dairy Queen, Curves, Hilton Worldwide, Jiffy Lube, Great Clips and so on.

Obviously, franchise businesses can vary wildly in investment, size and type, so entrepreneurs of all means have many different franchise options to choose from if that is their desired business model.

Legal advice essential

From early in the process of buying into a franchise, a franchisee should enlist a business attorney with specific experience with all aspects of franchise establishment. Both federal and New Jersey franchise laws are complex and detailed, and legal counsel will be needed to guide and advise a new franchisee from the beginning.

For example, the franchisor is required by law to disclose many detailed facts about the business to the franchisee, who will want a skilled franchise lawyer to review all disclosures, proposed terms and agreements like those dealing with leases, advertising, distribution and more. The commercial law attorney can answer questions and explain options presented by the potential arrangement, along with assisting the new franchisee in negotiation with the often more powerful franchisor.

Finally, legal counsel to a franchisee can guide the client in normal business compliance issues like licensing, permitting, government registration and filings, tax matters and more.