When you’re in the process of shopping for a franchise business, you’ll want to seriously consider utilizing the services of an experienced franchise attorney. Your goal in partnering with a franchise should be to create an airtight contract between you and the franchisor. Here are some key items that you’ll deal with as part of the process of purchasing a franchise, and how a seasoned franchise attorney can assist you.
Peace of mind. It’s highly likely that you’re new to the world of franchising. Think of the cost of hiring an experienced franchise attorney as an absolute no-brainer. It’s an investment in yourself, as well as your business. Utilizing one will allow you to sleep much better at night.
I strongly recommend reviewing the FDD (Franchise Disclosure Document, provided by the franchisor to prospective franchisees) carefully and in the presence of a skilled franchise attorney. An attorney who is inexperienced with franchise law will not be qualified to adequately insure your complete understanding of the details set forth in the franchise agreement. You’ll have instant, reliable answers to the many questions that you’ll surely have. Among other details, look for any litigation issues, the franchisor’s obligations to their franchisees, the franchisee’s obligations to the franchisor, any restrictions on sources of products or services, and any financing that the franchisor may provide or recommend.
Franchise Operations Manual. You will be provided with the franchisor’s operations manual. Included in this are topics such as vendor and employee relations, accounting and billing, royalties and how they paid, scheduling, safety, and community relations. I cannot stress enough just how valuable this manual is to you, as a franchisee, and to the overall success of your business. Again, your franchise attorney will be a major asset in helping you to decipher any legal “mumbo-jumbo” that you are sure to encounter when reviewing the franchise manual.
Then, there is the subject of Earnings Claims. Many franchisors make a claim of actual or potential sales, income, or profit for a franchised location. If they do, it’s disclosed here. Obviously, this is a very important section to a potential franchisee. And it’s often ambiguous, even confusing. I highly recommend to my clients that they contact several current franchisees to get their take on the earnings potential of the franchise. That feedback from the franchisees is sometimes difficult to interpret, so your franchise attorney will be able to translate the data into layman’s terms.
Franchise Agreement. When you arrive at the point of actually purchasing a franchise and becoming a franchisee, you will sign a Franchise Agreement, which is the contract between you and the franchisor. In it, you’ll find several key items, such as territory guidelines, the term, and renewal of the agreement, site selection, and selling and transfer rights.
Lawsuits. As in any business, lawsuits can occur in the franchising world. So by hiring a reputable franchise attorney in the beginning during the purchasing process, you will already have a solid business relationship in place with an attorney with whom you have previous experience and who you trust, should you ever need to call upon him.