Buying a Franchise – Do I need a Franchise Lawyer?
When investing in something as important as a business, having a qualified franchise lawyer by your side is a must. You will need a lawyer and an accountant who are both familiar and experienced with reading franchise contracts, understanding franchise relationships (especially the relationship between franchisees and franchisors), and handling situations that might arise when their client is a franchisee.
Should I Pay For a Franchise Lawyer Before Closing?
Many franchisors are advised by a team of lawyers. Although hiring a lawyer to review and negotiate the initial contract and basic transactions may seem costly, it could actually save you money in the long run. However, not all franchisors will allow changes to the franchise agreement. It’s best to find out if the company you are interested in investing in allows this before you pay to have your franchise lawyer rewrite anything.
Beyond rewriting the franchise agreement, an experienced franchise lawyer can also identify potential problems before they happen. If you do not have a franchise lawyer working for you before you close on a franchise, you might save on lawyer fees, but problems that could have been resolved before closing can become large, costly problems later. Often problems will never occur, so it is like a form of insurance, protecting you as you make big decisions. Your franchisor is on your team and typically there aren’t major legal issues that arise. With any large monetary venture, it is always in your best interest to have experts on your side, to provide you with peace of mind, and ensure you are getting the best deal.
State Laws – What You Need to Know
It is very important to have an franchise lawyer on your team who is familiar with your state’s franchising laws. From advertisements (Proposed ads must be pre-approved by the franchisor in states like California, Maryland, and Illinois) to the regulation of termination and non-renewals of agreements (Many states have laws including Minnesota, Maryland, Arkansas, California, Iowa, and Illinois), laws vary widely from state to state and it is in your best interest to have someone on your team that is familiar with your state’s rules, laws, and regulations.
Some of the Basics
An attorney can help a franchisee every step of the way, including:
- Evaluation of the franchisor, the opportunity, and the Franchise Disclosure Document (FDD).
- Review of the lease for a potential business location for a franchise.
- The potential negotiation of a franchise agreement prior to signing it (keep in mind that some franchises do not offer negotiation).
- Guidance for franchisee associations and help with collective bargaining.
- Help and guidance in terminating a franchise agreement.
- Arbitration, litigation, and mediation assistance for franchisees.
More Reasons, You May Need A Franchise Lawyer
The legal language of a franchise contract is not as easy to read as a brochure or an article about a company and its successes. You may be confused by terminology, or not fully understand what the contract is saying because of the way it is worded. A qualified franchise attorney can help you to understand the terms, and may also protect you from a mistake you might not be able to foresee on your own. Your lawyer can also advise you on the opportunity before you’ve signed papers, and can tell you if the opportunity is one that has the possibility of being lucrative with time. From the start, your franchise lawyer will review the franchise agreement and discuss with you the items that might be of concern to you.
What to Look For in a Franchise Attorney
Your attorney should have lots of experience in the franchise industry. Franchise lawyers are specialized in the industry and know what parts of the contract are negotiable, and what parts are not. He/she will know why parts of the contract are phrased in a certain way, and be able to save you all time navigating the agreement process.
Whether a lawyer only deals with franchisees, or also represents franchisors (in which case they might have more of an advantage because they have a balanced perspective on the industry), they should have a solid knowledge of the laws and regulations for franchising in your particular state. Franchise law is a specialty. Just as many doctors specialize in a particular field of medicine, lawyers may also specialize and you will get the most out of your time with your lawyer if he specializes in franchising. Experienced and specialized attorneys will know and understand why particular terms are in the agreement, and they will be able to point out when certain terms are not typical and should be questioned. Specialized lawyers will know where and when parts of the agreement can be negotiated.
Where Do You Go to Find a Qualified Franchise Attorney
There are a few ways to find a franchise lawyer. A great place to start your search for a franchise attorney is by asking your personal lawyer for a recommendation. A franchise attorney may be as close as a partner in your lawyer’s firm, or a professional colleague.
If you do not have personal lawyer, you can ask existing franchisees for a franchise lawyer referral during your conversations with them about the franchise you are researching. Some franchise lawyers are familiar with the laws in multiple states, and they may offer an advantage of already being knowledgeable on this companies franchise agreement.
Also, Bar associations are wonderful resources. Call your local bar association, or the American Bar Association for a reference. Also, go to the American Bar Association’s web site https://www.americanbar.org/directories/people_directories/people_directory_members_landing.html. Here, you can click can purchase a directory of all for $35 and focus on franchise lawyers. This member directory will give you a solid list of attorneys who specialize in franchising, organized in alphabetical and geographical order.
You will find that during your franchising journey, your franchise lawyer will be a priceless resource and a major asset to your business team.