What You Need to Know About Franchising
Puerto Rico may be the world’s oldest colony, but franchising is nothing new to this US territory. As it is part of the US, franchisors will need to follow federal franchise laws, but it’s important to understand some regulations that are specific to Puerto Rico.
Franchisors should know about Puerto Rico’s Dealer’s Contract Law, commonly known as Law 75, which protects franchisees against the termination, nonrenewal, or impairment of their agreements without just cause. This may mean that the franchisee did not perform an essential obligation under the franchise agreement or they did something that has a large negative impact on the franchisor’s ability to market the brand. The law also limits the franchisor’s ability to restrict a franchisee from transferring or restructuring the business, so it’s important to find the right franchisees when setting up in Puerto Rico.
Franchisors should also be aware of Puerto Rico’s tax laws. Royalties paid by a Puerto Rico franchisee to a U.S. franchisor are subject to withholding tax, which is currently 29%. In general, it’s important to understand the tax laws and how they may impact your finances.
The manufacturing sector, which mainly produces drugs, electronics and petrochemicals, accounts for about 50% of the island’s GDP.
In 2019, internal travel and tourism consumption in Puerto Rico amounted to roughly 5.51 billion U.S. dollars.
Flat Fee Program for Franchisors
Spadea Lignana’s CORE program for franchisors is a cost-effective and practical solution for the ongoing legal needs of franchisors, including but not limited to, FDD updates, state registrations and franchise agreement executions. Through a proprietary cloud-based system we can effectively and efficiently manage FDD Disclosures and Franchise Agreement executions for fair flat fees billed monthly. We believe that hourly billing, although necessary in certain circumstances like complex M&A deals and litigation, can weigh on the relationship between client and attorney. By coming up with a fair flat monthly fee, the uncomfortable negotiating of whether or not a 6 minute increment in your bill for replying to an email was legitimate goes away.
Attorneys Who Understand Puerto Rico Franchise Law
Franchise laws vary from state to state, and it can be difficult to understand the requirements. Spadea Lignana has streamlined the process to ensure you remain compliant as you grow nationally.