Why should I hire a franchise attorney?

Your best insurance policy when buying a franchise business is to hire an attorney. And not just any lawyer but one who is experienced with the legal nuances and complexities of franchising.

Checking off this step in the due-diligence process will give you peace of mind and possibly some negotiating advantages in the short term, while pre-empting costly errors over the long haul.

Here are answers to the most common questions we get about the need to work with a qualified franchise attorney during the franchise-buying due-diligence process.

Why Should I Retain an Attorney?

This should be obvious. The documents you sign to become a franchisee could have enormous legal, financial and lifestyle repercussions for you and your family. So, it’s important to have those documents professionally reviewed before a deal is transacted.

Specifically, the franchisor will provide you a copy of the brand’s Franchise Disclosure Document, which includes 23 sections or “items” required by the Federal Trade Commission (FTC). Embedded in that 300-page behemoth is the Franchise Agreement you will ultimately sign.

These are complicated documents that you should not go through alone. To avoid surprises later, every detail, from fees and responsibilities to the resale of your business and how disputes are settled, should be clear to you before you sign.

Why Do I Need a Franchise Attorney?

Franchise attorneys are specialists in franchise law. They stay current on the web of federal and state regulations and statutes that directly and uniquely affect this $860 billion industry.

While the FDD may be a tough read for you and even general-practice attorneys, it’s not for experienced franchise attorneys. They read hundreds of FDD’s and know exactly what to look for. They know what is typical and what clauses are of concern and should be modified.

So while a business or general practice attorney may churn hours suggesting modifications that, frankly, are not practical or negotiable, a franchise attorney cuts to the chase, saving you fees and providing clear, actionable advice.

What Should I Expect From a Franchise Attorney?

A franchise attorney’s key role is to review your FDD and Franchise Agreement and ensure the franchisor is complying with federal law as well as laws specific to your state. Typical activities include:

Checking that the trademark is live and valid since this is a cornerstone of the franchise opportunity
Reviewing all sections of the FDD and Franchise Agreement, and explaining them to you
Providing a summary review letter with comments and opinions, plus a follow-up conversation to address your questions and any concerns
If modifications are recommended, these are included in the review and a strategy is devised on how to discuss these with the franchisor

Within the FDD and Franchise Agreement, these sections especially are given a deep dive in a discussion with you:

Your proposed territory
The duration of your agreement
The brand’s trademark and signage
The definition and calculation of royalties
The upfront franchise fee and ongoing fees
Operating protocols and what is expected of you versus the franchisor
The obligated spend for marketing, and expectations for you and the franchisor

Are Any Parts of a Franchise Agreement Negotiable?

Similar to the regulations of a homeowner’s association, a franchise agreement is intended to apply consistently to all franchisees – everyone is expected to follow the same rules in order to protect the brand and the value of the investment.

To this end, modifications to Franchise Agreements are infrequent. Still, there are exceptions and a franchise attorney, unlike other types of attorneys, will know what these are and the extent to which they can be negotiated.

Elements of the agreement most open to modifications include:

Your defined territory
Timeline to open your locations
Timing and payment method of your franchise fee
Parameters of your post-termination non-compete
Parameters of the cure period for you to resolve defaults
Parameters of your renewal rights and termination clause

At What Point In the Process Should I Contact A Franchise Attorney?

Wait until you are close to committing to a franchise before connecting with a franchise attorney. This is usually in the days leading up to Discovery Day (aka Confirmation Day).

If you’ve made travel plans to attend, that’s your signal to start talking. If you are working with a franchise consultant, this is part of the natural process and you will be introduced to a couple of options.

How Do I Find a Franchise-Specific Attorney?

If you are not working with a franchise consultant, feel free to contact us. We work with several outstanding attorneys. Another option is to search the AVVO website.

What Questions Should I Ask to Vet a Franchise Attorney?

Once you have narrowed your search, interview the franchise attorney by phone or zoom. Ask questions and learn about their experience and their perspectives, as well as fees and services.

Why should I hire a franchise attorney?