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Use a Franchise Attorney Before You Commit to a Franchise

by Ed Teixeira

Before you invest in a franchise, make sure you use a franchise attorney to represent you. Learn why it's important to utilize a franchise attorney.

Purchasing a franchise can be the most important decision some individuals will ever make. Some people will use retirement savings, a home equity loan or money from family members. Despite the success that franchising has brought to many people, it has also brought heartache to others. The key component of the franchise relationship is the franchise agreement, which includes a number of ancillary documents. These documents can include a personal guaranty, non-compete and an acknowledgement disclosure pertaining to information presented to the franchise prospect by franchisor staff during the sales process.

Franchisors utilize franchise agreements with contract language that has been refined over a number of years. Many of the provision and language in today's franchise agreements have been crafted based upon prior franchise litigation and various legal decisions. Since franchisors conduct their business over a broad geographic area with a number of franchisees they require a strong agreement that favors the franchisor and is able to withstand legal challenges and franchisee claims. However, if a franchisor doesn't fulfill their contractual obligations these provisions can be for naught.

Given these factors, it's important that prospective franchisees use a qualified franchise attorney before completing the transaction. The worst reason for not using a franchise attorney is to save money.

An unintended consequence of the Internet is that so much information is available, on numerous subjects; it can create a false sense of confidence. There is a good amount of franchise information on the Internet, including various websites such as the FTC and State sites. It's fine to use this information to gain a basic understanding of franchising but don't think this new found knowledge can replace an experienced franchise attorney. Every day some individuals will purchase a franchise without the benefit of a franchise attorney. This happens despite admonition in the Franchise Disclosure Document to seek the advice of an attorney. Following are some good reasons for using a franchise attorney.

The reasons and benefits for using a franchise attorney:

  • Franchise law has become more complex and as result requires a certain expertise that a non-franchise attorney may not have.
  • A franchise attorney has experience dealing with various franchisors and could detect warning signs.
  • There are particular provisions in franchise agreements that are unique.
  • A franchise attorney will know what sections in the franchise agreement to focus on.
  • It may be easier for a franchise attorney to negotiate changes to your franchise agreement.
  • You can protect yourself from future problems.
  • Since franchisors are represented by franchise attorneys you want your attorney to speak the same language.
  • The cost of a franchise attorney will represent a small portion of your total investment in the franchise.

Before you sign the franchise agreement, pay the franchise fee and make the commitment to your new franchise business be sure that a franchise attorney is guiding you from beginning to end... It's an investment you need to make.

 

© 2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com

 

 

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