Be Sure to Use a Franchise Attorney When Youíre Buying a
by Ed Teixeira
For a number of people, purchasing a franchise is the most important
decision they will ever make. In some cases they will use their retirement
savings, secure a home equity loan or rely on loans from family members to
fund the investment. Despite the success that franchising has brought to
people, itís an investment that has risk. The key component of the franchise
relationship is the franchise agreement, which includes a number of
ancillary documents. These documents can include a personal guaranty,
non-compete and an acknowledgement disclosure pertaining to information
presented to the franchise prospect by franchisor staff during the sales
Franchisors utilize franchise agreements with contract language that has
been refined over a number of years. Many of the provisions in todayís
franchise agreements have been crafted based upon prior franchise litigation
and various judicial decisions. Since franchisors conduct their franchise
business over a broad geographic area they require a strong agreement that
favors the franchisor and is able to withstand various legal challenges and
franchisee claims. However, if a franchisor doesnít fulfill their
contractual obligations these provisions can be for naught.
Given these factors, itís important that prospective franchisees use the
services of a qualified franchise attorney before completing the
transaction. The worst reason for not using a franchise attorney is to save
An unintended consequence of the Internet is that the amount of
information available, on a variety of subjects, can create a false sense of
confidence. There is a great deal of franchise information on the Internet,
including various websites such as the FTC site. It fine to use this
information to gain a basic understanding of franchising but donít think
your new found knowledge can take the place of a franchise attorney. Every
day individuals will purchase a franchise without the benefit of franchise
counsel. This happens despite the admonition in the Franchise Disclosure
Document to seek the advice of an attorney.
The reasons and benefits for using a franchise attorney:
- Franchise law has become more complex and as result requires a
certain expertise that a non-franchise attorney may not have.
- A franchise attorney has experience dealing with various franchisors
and could detect warning signs.
- There are particular provisions in franchise agreements that are
- A franchise attorney will know what sections in the franchise
agreement to focus on.
- It may be easier for a franchise attorney to negotiate changes to
your franchise agreement.
- You can protect yourself from future problems.
- Since franchisors are represented by franchise attorneys you want
your attorney to speak the same language.
- The cost of a franchise attorney will represent a small portion of
your total investment in the franchise.
Before you sign the franchise agreement, pay the franchise fee and make
the commitment to your new franchise business be sure that a franchise
attorney is guiding you. Itís an investment you need to make.
Ed Teixeira is the President of FranchiseKnowHow, LLC.
He can be reached at
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