A friend of mine is a corporate attorney for a banking institution. She travels to whatever city she’s needed in to do whatever it is corporate attorneys in the banking sector do. She’s a busy lady. Several people that know her tell me she’s whip-smart, and I believe them.
But, I would never recommend her to my clients…people who are thinking about investing a couple of hundred thousand dollars in order to become franchise business owners. Never. That’s because she’s not a franchise attorney. Franchise law is not her specialty.
If you’re buying a franchise, you need to only work with experienced franchise professionals, including attorneys who know franchising inside and out.
The Importance of Hiring A Franchise Attorney
If I had $100 for every time I’ve told a client or entire audience to “only use a franchise attorney,” I’d be a very wealthy man. To the best of my knowledge, most people listen to my suggestion. But, sometimes they don’t, and it’s a problem.
Why is it important to only use a franchise attorney when you’re buying a franchise? Let’s count the reasons:
1) Attorneys That Specialize in Franchising – Specialize in Franchising
In other words, they’ve taken the time to learn all the intricacies of franchising and franchise law. Most franchise attorneys today didn’t set out to become franchise specialists. They weren’t really exposed to franchising in law school. As a matter of fact, some of them probably started out as corporate attorneys.
Here’s what Leslie D. Curran, a partner at the well-known franchise law firm of Plave Koch PLC, wrote about the subject on the ABA (American Bar Association) website:
“Before addressing laws and regulations that are unique to franchising, franchise attorneys often find themselves advising companies on corporate and trademark issues. For example, a company considering franchising may wish to form a new entity to offer franchises and must decide what type of entity to form, how to organize it, and what organizational documents are necessary. Because franchisees buying into a system will want the unrestricted right to use the name and mark used by the system, a franchise attorney will work with the franchisor to obtain federal registration of a trademark.”
2) Franchise Attorneys Read and Write Franchise Contracts all the Time
That’s why experienced franchise attorneys know what to look for in a franchise document. They know exactly what to hone in on. In addition, franchise attorneys keep up with all of the latest franchise laws.
And, franchise laws can vary from state to state. Some states even have separate rules and regulations. They are known as “Regulation States. In alphabetical order, they are:
- New York
- North Dakota
- Rhode Island
- South Dakota
The states I just listed have the most comprehensive regulation of franchises, according to the attorneys at Kern & Hillman, LLC.
3) Attorneys Specializing in Franchising Know the Franchise Disclosure Document, (FDD) Like the Back of Their Hands
In case you didn’t know, the FDD is what all prospective franchise owners receive well before they actually buy the franchise they’re interested in.
By law, the FDD contains 23 specific items about the franchisor. Some of them include:
- Identity and Business Experience of Key Persons
- Litigation History
- Franchisees Estimated Initial Investment
- Restrictions on Sources of Products and Services
- Obligations of the Franchisee
- Obligations of the Franchisor
As you can see, there are some very important things contained in the FDD.
Protecting Your Interests
The importance of hiring a franchise attorney goes well beyond their understanding of the documents you’ll be required to sign once you’ve reached your decision.
Hiring a franchise attorney is important because, when it comes down to it, their real job is to protect you. It’s one thing for them to explain the legal documents in franchising. It’s quite another to advise you. A good franchise attorney will offer his or opinion on the feasibility of your potential new venture.
Today’s franchise attorneys have seen their clients succeed. They’ve also seen their clients fail. Having a trusted advisor in your corner can greatly improve your chances for success as the owner of a franchise business. A good franchise attorney can be that trusted advisor – and more.
How To Find A Franchise Attorney
Here are three online resources that you can use to help find a franchise attorney:
- The American Association of Franchisees & Dealers (AAFD) lists several franchise attorneys on their website.
- The LawInfo website lists franchise attorneys by state.
- FindLaw lists franchise attorneys by state and city.
In addition, you can sometimes locate a franchise attorney by asking for a referral.
Try asking attorneys you already know for a referral. If you use an accountant, he or she may know where to find a franchise attorney. You can also ask franchisees of the franchise concept you’re looking into for the names of franchise attorney they used.
Remember: Use franchise professionals whenever possible during the franchise purchase process. You’ll breathe easier knowing you did everything you could to mitigate your risk.
Legal Photo via Shutterstock
I’ve assisted many clients at the time they were considering buying into a franchise — either an existing franchise location or opening a new one. Those are usually big dollar investments for people — sometimes they are borrowing from their retirement account to pursue their first business. My role is not so much to negotiate the franchise agreement — they are mostly not negotiable. Rather, I provide the client with some perspective on the relative reasonableness (or not) of the franchise agreement and financial terms with the goal of allowing the client to make a well-informed decision to spend their savings and lots of energy on the opportunity. Business issues relating to franchises are a specialty-area. The author is correct in suggesting an attorney with franchise experience.
Thanks a lot for your comment-and for sharing a bit about you help would-be franchisees.
It can be risky to buy a franchise. Research and help from franchise attorneys can go a long way, in making the franchise ownership choice a good one.
The Franchise King®
Thanks for listing a few good resources for finding a franchise attorney; I feel like that is the hardest part in the whole process. Once you find a lawyer that you know and trust, it’s much easier moving forward. This is a big decision, though, so making sure you find a reputable lawyer to represent your needs is of the utmost importance. You are putting a lot of trust on whoever you hire, so you want to make sure they are the right person for the job.
I agree with the article that it would be important to hire a franchise attorney specifically for the purpose of writing and reading contracts. Having a franchise attorney deal with franchise documents seems to be the best way to help you comply with the laws that are specific to your state. I would definitely consider hiring a franchise attorney to help me with all the legalities and paperwork if I ever start a franchise.
The article makes a great point about how franchise attorneys can help protect your business and its interests. After all, they aren’t just there to fill out paperwork day after day. They can defend your business if someone makes a claim against one of your franchises.
Its always best to find an attorney that has a focus on one particular area. A generalist attorney is never going to be able to offer the same expertise as an attorney who spends all/most of their time in one area of law.
Unfortunately people often don’t heed this sound advice and go with an attorney based on price or some other factor that ends up costing them more in the long run.
Great article!, I love all this, because I was able to gain information and also some tips. Thank you for posting this very informative article.
I am glad that you come up with this kind of article. I appreciate this a lot and I found it very informative and worth reading. Thanks for posting.