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Reasons to Hire a Franchise Attorney BEFORE Buying a Franchise

Purchasing a franchise can be an exciting, but overwhelming endeavor. It comes with inherent risk, but seeking guidance from experienced professionals can help you determine the expected costs and value, ensure you are legally protected, and are purchasing the franchise the right way. Though this may add to your overall cost, it is well worth it if the counsel is well-versed in franchise and small business matters. To help you dispel any doubt that this is a necessary resource, I am here to lay out some of the top concerns potential franchise buyers have when hiring a franchise attorney.

One of the biggest questions I get asked in my practice is why hire a franchise attorney when you can’t change the legal documents? To start, they actually might be able to change the documents. But even if they can’t, here’s three reasons why:

  • Changing the legal documents and renegotiating the terms of a franchise agreement is usually overrated. To be sure, there are times when doing so is necessary and makes a big difference. But don’t be mistaken, this is an UNEQUAL relationship. The franchisor has the upper hand, and always will. This, however, does not mean that they should not buy the business. It just means they must be careful. Hence, a real reason why you should want a professional experienced in these types of matters to review documentation.
  • Franchise Disclosure Documents and Agreements are long, boring, and filled with legalese. A good attorney will be able to explain these terms in an easily understandable fashion. This leads to better decision-making.
  • Whenever I review franchise documents I always list questions for the potential buyer to ask the franchisor. This is vital to your client’s research process and important to fully understand what they are purchasing.

Unfortunately, most people do not consult with an attorney or any professionals before buying a franchise. This is a mistake. There are many good and many bad franchises. A quality attorney should be able to determine and figure out the difference to ensure that a prospect makes an educated decision based on a complete understanding of the process and the language contained in the legal documents that they will be required to sign. This leads me to the next section in our guide: knowing the franchise buying process inside and out.

It is important to understand the basic components to what make up a franchise in the first place. In order to be considered a franchise, it must promise to provide a trademark or other commercial symbol, promise to control or provide significant assistance in the operation of the business, and require a minimum payment of $500 during the first six months of operations. You should look for the following listed within a contract when trying to determine whether this is an appropriately accredited operation or not:

  • A franchisee is granted the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial part by a franchisor
  • The operation of the franchisee’s business pursuant to such a plan is substantially associated with the franchisor’s trademark, service mark, tradename, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate
  • The person granted the right to engage in this business is required to pay a franchise fee

The reality is, there are many reasons you should hire a franchise attorney. The above reasons just scratch the surface of the importance of having an appropriate counsel. I could go on all day listing ways hiring a franchise attorney would significantly improve your experience but the biggest thing to remember is that I have never heard anyone say: “Geez, I really regret doing my due diligence before investing in this franchise.” Plain and simple.