Starting a business in any region requires an understanding of the local rules. Running a business is hard enough without worrying about getting into legal trouble. Virginia offers a myriad of business opportunities that can turn good profits if well capitalized. One option that entrepreneurs have when operating a business is to franchise. Franchising allows a business owner to grow his or her enterprise without the hassle of the daily operations.
In the U.S, franchising is responsible for over 21 million jobs across 900,000 locations across the country. The economic contribution of franchisees is significant as well. The term “franchise” may have varying definitions in different states, but the general understanding is that it is a business relationship that entails distribution of goods and services. It is common for business operators to find themselves in a legal rigmarole because they created a franchise without intending to. Three characteristics come into play when defining a franchise under federal and state laws.
Association with Trademark
For a business to be considered a franchise, it must have a significant connection with the trademark of the franchisor. A relationship with any commercial symbol can also qualify for “substantial association.” The laws regarding this association are interpreted broadly, so it is essential for a franchisor to make all aspects clear. Franchisees should have permission to use a trademark or any other business symbol for the sake of clarity.
Compliance to Standards
The established standards will depend on the licensor. In some instances, a franchisor may have a marketing plan that franchisees have to stick to when conducting business. Another standard that a franchisor may have is putting in place controls that the franchisee has to implement. It is essential for a franchise business in Virginia to understand the exact rules in place to avoid a breach.
Payment of a Fee
The third characteristic that defines a franchise is payment of fees, which don’t necessarily have to be defined as franchise fees. What qualifies is the continued payment of royalties or other fees such as advertising, consulting, or training. These payments give the franchise the right to conduct business operations. According to the FTC Franchise Rules, fees of less than $500 are exempt for the first six months.
Buying a Franchise in Virginia
Building a business from the ground up can be a complicated process, not to mention an expensive endeavor. Buying a franchise allows an entrepreneur to operate under an established business model. Becoming part of a franchise means you don’t have to be subject to the usual trial and error tactics and failures of a startup. Purchasing a franchise is not as straightforward, though. You should be ready with the necessary information before you start shopping.
Firstly, Virginia requires registration of all franchises. Before offering or selling a franchise, the Franchise Disclosure Document must undergo registration at the State Corporation Commission. The FDD is one document that can help you gather a lot of relevant information on the business you intend to buy. Research is always advisable when purchasing any business franchise or not. The franchise should have at least two weeks to review this document and understand the terms of operations. Of course, the opinion of a franchise lawyer will also play a significant role when trying to figure the FDD.
Another way you can collect information about a particular franchise is to speak to existing ones. Before you can sink your money into a cleaning business franchise, for instance, find out how the other businesses are fairing. What kind of clients in Virginia of do they cater to? Is the market too saturated? Such information gives you a blueprint for the business before getting started.
You may wonder what Virginia offers in terms of business prospects. For one, the corporate income tax in the state is among the lowest in the U.S. Virginia also has reimbursements for recruiting and training services, recycling old equipment comes with state tax credits, in addition to grants for economic and infrastructure improvement. Fairfax is one city that offers attractive prospects. The Fairfax Nursing Center and the city are the top employers; and therefore, any franchise that caters to related services would be an excellent business opportunity. Abingdon has one of the lowest medians for housing costs in the state and provides many opportunities for outdoor-oriented businesses. Fall Church, Vienna, and Merrifield are other areas in Virginia worth looking at.