Congratulations! You have decided to become your own boss. Now, it's time to search for a franchise that you want to invest in and figure out which opportunity is best for you. But what happens after you find a business you want to own? You need to understand the legal implications of the decision you are about to make. Therefore, you should seek legal assistance from a franchise lawyer.
A franchise attorney is a professional you will need throughout the life of your business. They ensure your new business entity is set up correctly and mediate if/when there are management disagreements or disputes.
Becoming a franchisee is an agreement that you make with the franchisor, with the Franchise Agreement being the primary document defining each party’s responsibilities throughout the term of the agreement. The franchise operations manuals, and FDD (franchise disclosure document), for instance, are documents that contain the agreements you make with the franchise. To understand everything you are legally responsible for, get the help of a lawyer to explain all the concepts at play, and their implications .
What do franchise lawyers do?
As a prospective franchise owner, you want a franchise lawyer that specializes in franchisee clients, not a firm that represents franchisors. They protect your rights as a new franchise owner and advise you on the legal implications of the decisions you make.
What makes the franchise attorney important?
Unlike general-practice or even business focused lawyers, franchise attorneys understand the franchisee-franchisor relationship and all of its nuances. If you already have a personal or business lawyer, have s/he help you find a franchise lawyer to advise you through your franchise purchase, opening, and ongoing operation as necessary.
Why You Need a Franchise Attorney
Franchise Attorneys are Specialists
They have a vast understanding of franchise law – that which governs the franchisee-franchisor relationship. In a post published in the American Bar Association (ABA), Leslie D Curran says franchise lawyers often start as corporate and trademark advisors. Then, they set out the organizational documents that earn the new company a federal registration trademark.
Writing and Reading the Contracts
Contracts are legally binding documents that must be written and read with precision. A franchise attorney knows what to look for in an agreement. First, they are well educated on the latest franchise laws. Franchise laws vary from state to state, with some jurisdictions having more comprehensive rules than others.
The lawyer will draft contracts you make with your employees. Then, they will help you understand the conditions that your franchisor is asking of you before you agree to it.
For example, the Franchise Disclosure Document (FDD) contains 23 items about the franchise. The FTC’s franchise sales rule requires that the franchisor disclose this document to you, and that you acknowledge receipt and understanding, before you buy a franchise. Some of the items listed include the litigation history, obligations of the parties, and financial performance of current franchises.
Protect Your Interests
The attorney understands the content of the documents that you sign and they will actively advise you when making decisions. A lawyer's primary job is to protect your interests. They will inform you about the pros and cons of entering the franchise agreement. The professional advice and legal representation you get from them will increase your chances of success in your franchise business.
If a franchise sales person – or anyone at the franchisor - ever tells you that you don’t need an attorney, then it is a red flag and a sure sign that you do. You should understand every aspect of the agreement before you sign it. Don't be pressured or rushed into making hasty decisions. Instead, involve a lawyer to take you through each item.