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.
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