1. What Must You Receive before Signing or Paying?
Confirm the seller’s registration status, obtain the proposed documents, and establish the earliest permissible signing and payment dates. Receiving an FDD alone does not establish compliance with the applicable disclosure rules.
Registration and Required Documents
New York General Business Law §683 generally requires registration before offering or selling a franchise, unless an exemption applies. Check the franchisor’s legal name through the registration search identified by the New York Attorney General; registration does not constitute government endorsement.
Review the franchise disclosure document, proposed agreement, guarantees, and state addenda together. If the seller claims an exemption, request its legal basis rather than assuming registration is unnecessary.
Federal and State Timing Rules
The FTC Franchise Rule generally requires FDD delivery at least 14 calendar days before signing a binding agreement with, or paying, the franchisor or its affiliate. State requirements apply separately.
For franchises subject to registration, GBL §683(8) requires disclosure at the earliest applicable point: the first qualifying face-to-face sales meeting, ten business days before signing, or ten days before payment. Keep separate records of meetings, document delivery, signatures, and payments.
2. Contract Terms That Affect Cost and Exit Rights
The initial fee tells only part of the story. Continuing charges, operating restrictions, and personal guarantees can change the financial exposure, while renewal and transfer conditions affect how the owner eventually leaves the business.
Fees and Financial Performance Claims
Check royalty formulas, advertising contributions, required purchases, technology charges, and refurbishment obligations. Identify which costs the franchisor may change and whether minimum payments apply when sales fall.
Financial performance claims generally require a reasonable basis, written substantiation, and disclosure in FDD Item 19, subject to limited exceptions. Request supporting records and distinguish revenue from profit after rent, payroll, financing, and other expenses.
Ask whether the figures include company-owned outlets, recently opened stores, or locations with materially different costs. An average may conceal wide differences, so review the reporting period and the proportion of outlets that achieved the stated result.
Territory, Transfers, and Guarantees
When reviewing franchise agreements, examine exceptions to territorial protection, including online sales and alternative distribution channels. Renewal or transfer may require fees, upgrades, approval, or a new agreement.
Read personal guarantees separately. Determine which obligations they cover and whether release requires express written approval after a sale or termination.
3. Can the Premises Support the Planned Opening?
The franchisor, landlord, and public agencies make different decisions about the premises. Align their requirements before accepting an opening deadline or rent obligation that may continue during construction or approval delays.
Legal Use and Required Approvals
NYC Department of Buildings records in BIS and DOB NOW can help establish the premises’ permitted use. A change in use, egress, or occupancy may require a new or amended Certificate of Occupancy.
Some buildings predating 1938 qualify for an exception; a Letter of No Objection may help document lawful use. Additional permits depend on the business, so an existing storefront or brand approval does not establish readiness to open.
Lease and Opening Deadlines
A coordinated commercial lease review should address permitted use, alterations, rent commencement, and franchise opening deadlines. A delay under one contract does not automatically excuse obligations under another.
Specify who pays for required changes, whether deadlines extend during approval delays, and what happens if an essential approval fails. Any negotiated termination right should address notice, deadlines, and treatment of deposits.
For an existing outlet purchase, confirm whether the landlord must consent to assignment. Franchisor approval does not itself transfer the lease or release the seller’s guarantees.
4. Resolve Outstanding Terms before Committing Funds
The final decision should rest on documented obligations and identified uncertainties. Resolve material differences between sales statements and the contract before signing, particularly when they affect costs, support, or opening feasibility.
Written Promises and Dispute Provisions
Compare emails and presentations with the final documents, and retain dated copies. Do not sign an acknowledgment denying receipt of earnings claims or other representations if that answer is inaccurate.
Review notice methods, cure periods, arbitration, and court-selection clauses. The store’s location alone does not determine the dispute forum; contract terms, jurisdiction, and venue rules also matter.
21 Oct, 2026
