Texas franchise law sets the rules for how franchises operate in the state. If you want to enter a franchise, you need to know the important rules under the Texas Business and Commerce Code. These laws protect both the franchisor and the franchisee, making sure the relationship is fair and clear.
Franchise Disclosure Document (FDD)
Under state law, franchisors must give potential franchisees a Franchise Disclosure Document (FDD). The FDD gives detailed information about the franchisor’s business, such as how it performs financially, its fees, and any legal issues it has faced. This document helps franchisees understand the risks and benefits before joining the franchise. The franchisor must provide this document at least 14 days before the franchisee signs the agreement or pays any money.
Franchise Agreement Terms
Franchise law requires that the franchise agreement clearly list the rights and responsibilities of both the franchisor and franchisee. This includes details about how long the franchise lasts, how it is renewed, territorial rights, and how the business can use trademarks and intellectual property. The agreement must also explain how the franchise can be ended and any obligations that remain after the franchise ends, such as non-compete clauses or confidentiality rules.
Registration and State Compliance
Franchisors must register their franchise with the state. They must submit the FDD to the Texas Department of Licensing and Regulation (TDLR) for approval. Additionally, they must follow both state and federal rules for business practices, advertising, and consumer protection.
Texas franchise law makes sure that franchises are transparent and fair. Understanding these rules helps both franchisors and franchisees protect their legal rights and run successful businesses.