what to ask a franchise lawyer

Key questions to ask a franchise lawyer are:

• what protections does the Code provide?;
• what are the franchisor’s disclosure obligations?;
• should the franchisor provide leasing documents?;
• what happens at the end of the franchise term?; and
• is it possible to sell my franchise before the end of the term?

Full Answer

What should I look for in a franchise lawyer?

It is important that your franchise lawyer has significant experience on the franchisor side of the ball. If a franchise attorney does the majority of their work for franchisees, they may be too pro-franchisee with their advice.

What questions should I ask a potential franchisee in the interview?

And as a franchisor, you must be certain that a potential franchisee will be the right fit for your team and company. What kinds of questions should you include in the interview? Consider asking the following: 1. Do you understand what it means to be a franchisee?

Can a lawyer be a franchisee?

Unfortunately, the legal profession is highly competitive. And with hundreds of thousands of franchises that have been sold in the United States in the last decade, many attorneys who are not franchise specialists can claim to have franchise experience.

How do you know if a franchise attorney is unqualified?

If a franchise attorney does the majority of their work for franchisees, they may be too pro-franchisee with their advice. And if they do all their work on the franchisee side and do not regularly draft Franchise Disclosure Documents (a question you should ask anyone you are interviewing), then they are unqualified.

What are good questions to ask a franchise?

If a franchisee has agreed to talk to you, download this template for suggested questions you may ask.How long have you been in business?What made you choose this franchise?How would you rate your relationship with the franchisor?How would you rate the initial training?How would you rate the marketing programs?More items...•

What important questions should you ask before becoming a franchise?

Overall Questions to ask the Franchisor:Where will your franchise be located?What is the success rate of existing franchises?What method is used to protect franchisees from poorly performing franchises?Is there a franchise owners association?Is there a franchise advisory council?More items...

What are the key questions to be assessed by the franchisee in evaluating the franchisor?

What to consider when evaluating a franchise opportunityThe market. Has a defined market been determined? ... Company history. ... Financial statements. ... Level of investment. ... Training and support. ... Territory. ... Royalties. ... Restrictions.More items...

Is it extremely beneficial working with a franchise attorney why why not?

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.

What do you look for when buying a franchise?

These are the 6 factors you should consider before getting into franchise;Market Requirement. The best way to start a business is to understand the market and their demands. ... Track the brand. There are many brands in the market open for franchising. ... Expenditure. ... Competition. ... Training. ... Restrictions.

How do I prepare for a franchise interview?

How to Prepare for the Franchise InterviewBe Aware of Potential Challenges. Do your homework. ... Analyze Your Financial Situation. ... Talk to Current Franchisees. ... Questions for the Franchisor. ... A Mutually Beneficial Relationship.

How do you evaluate a good franchise?

How to Evaluate a Franchise Opportunity1) Speak to the Franchise Business Development Person. ... 2) Read the Franchise Disclosure Document. ... 3) Determine the Level of Initial and Ongoing Support for Franchisees. ... 4) Look at the Franchise Fees and Costs. ... 5) Speak to Current and Former Franchisees.More items...•

What are 3 things that the franchisor often provides to the franchisee?

A franchisor will typically offer the following assistance to franchisees:Financial assistance. Not all franchisors offer financial assistance but some do have financing programs available to franchisees. ... Location selection. ... Training/operations manual. ... Advertising and marketing. ... Ongoing support.

How do you evaluate a franchise agreement?

5 Important Steps to Evaluate Franchise OpportunitiesFind a franchise that fits you – Think about what your interests are, your prior experience, and what you're good at. ... Obtain information about franchisors – Research via the internet or obtain materials directly from the franchisors.More items...•

What is one commonly reported disadvantage of franchising?

Drawbacks include high franchise fees, managerial regulation, shared profits, and transfer of adverse effects if other franchisees fail.

What is the average initial franchise fee?

Most franchise companies require a new franchisee to pay a one time initial fee to become a franchisee. This fee can be as low as $10,000 to $15,000 or as high as the sky--in some cases well over $100,000. The average or typical initial franchise fee for a single unit is about $20,000 or $35,000.

What are the main disadvantages of a franchise?

Disadvantages of franchising for the franchiseeRestricting regulations. ... Initial cost. ... Ongoing investment. ... Potential for conflict. ... Lack of financial privacy.

What to consider when buying a franchise?

When buying a franchise business, it is important to consider both the risks and rewards of joining an established brand. If you are purchasing a franchise business for the first time, you may have several legal questions Franchise Code of Conduct (the Code) and how it applies to you. If you have already received franchise documents from the franchisor, you may also have questions about whether your franchise agreement is ‘standard’ or similar to other business purchase contracts you may have received in the past.

What is the Australian franchise code?

The Code provides a legislative framework which applies to you, the franchisee, no matter which Australian state or territory you are based in. By imposing disclosure and process requirements on the franchisor, the Code contains some built-in protections for you.

Can a franchisee use the franchise brand?

As a franchisee, when the franchise agreement comes to an end, you can no longer use the brand and the systems. Instead, you will need to look to the terms in your franchise agreement to see whether you have the option to renew.

Before investing in a franchise, there are certain questions you should address with your legal counsel first

If you are considering purchasing a franchise, there are a few initial questions you should ask your franchise attorney before you make the initial investment. The list below includes several important topics to discuss, including questioning the registration process, the FDD itself, and industry-specific issues.

By Lane Fisher

If you are considering purchasing a franchise, there are a few initial questions you should ask your franchise attorney before you make the initial investment. The list below includes several important topics to discuss, including questioning the registration process, the FDD itself, and industry-specific issues.

Questions You Should Ask Your Franchise Attorney

If you are considering purchasing a franchise, there are a few initial questions you should ask your franchise attorney before you make the initial investment. The list below includes several important topics to discuss, including questioning the registration process, the FDD itself, and industry-specific issues.

Was properly disclosed with a legally compliant FDD?

The FTC Rule requires franchisors to disclose certain aspects of their business and business experience in a 23-item document – the Franchise Disclosure Document (often referred to as an “FDD”) and to wait fourteen calendar days before taking money from you or signing a franchise agreement.

Was the FDD registered with the state on the day you were provided with it?

Many states require franchisors to register their FDDs before offering or selling them to prospects.

Was the FDD I was given properly updated?

The FTC requires franchisors to amend their FDD annually, within 120 days of their fiscal year. A typical fiscal year ends on December 31, meaning the deadline for renewal would be April 30. If you were given an FDD in March, it might be wise to wait until the annual renewal version in April before you move forward.

Who else has information about the franchisor?

All FDDs are required to include contact information of current and former franchisees. Existing franchisees know the ins and outs of the business and how the franchisor treated them and can give a fresh perspective on the franchise system.

How much is this going to cost me?

Ask your franchise attorney to go over the initial fees, other fees, and the estimated initial investment – each of which has their own item in the FDD.

How much money will I make?

While not required, a franchisor may choose to include financial performance information in its FDD and may do so as long as there is a reasonable basis for the information.Providing financial performance information that is not included in the FDD (except for a few limited exceptions) is a big red flag and you should ask your franchise attorney about the consequences of these actions, which are likely forbidden by the FTC..

How to find a franchise attorney?

How Do I Find the Right Franchise Attorney? 1 IFA. The International Franchise Association (IFA) provides a list of their attorney partners on their website. While these firms are reliably franchise-oriented, some work exclusively for franchisors. Also, all pay for IFA membership. 2 SBA, Bar Association, Chamber of Commerce. Check with your local Small Business Association (SBA) office, Chamber of Commerce, and Bar Association for listings and recommendations of local franchise attorneys. 3 Current Franchisees. Ask some of the franchisees of the system you are considering who they used for legal counsel and what their experience was. 4 Franchise Attorneys. Don’t be afraid to “interview” franchise attorneys over the phone to get an idea of their philosophies, costs, experience, and personalities before making your decision.

What to do before meeting with franchise lawyer?

Prior to meeting with him or her you should review the documents on your own and prepare questions and concerns for your meeting. Don’t worry if some parts of the FDD don’t make sense to you. FDDs usually contain an extensive amount of “legalese” that your franchise lawyer will help to put into layman’s terms.

Why do franchisors need to have a franchise attorney?

This is because franchisors don’t want to give one franchise owner more preferable terms than another, which could create dissent and resentment within the system. Regardless of whether a franchisor is willing to bend on its terms, having a franchise attorney review them is a MUST.

How do franchisors collect royalty payments?

Royalty payment structure: Some franchisors collect royalty payments through automatic withdrawals from a franchisee’s account , which can make tough financial months even more stressful. This payment schedule is sometimes negotiable.

What is an IFA partner?

The International Franchise Association (IFA) provides a list of their attorney partners on their website. While these firms are reliably franchise-oriented, some work exclusively for franchisors. Also, all pay for IFA membership. SBA, Bar Association, Chamber of Commerce. Check with your local Small Business Association (SBA) office, ...

What can a franchise lawyer do?

Franchise lawyers may also be able to help you negotiate the terms of your agreement and offer guidance on which aspects of the agreement are vague, requiring additional clarification from the franchisor.

Is franchise legal advice cheap?

While legal advice is never cheap, consulting with a franchise lawyer will be money well spent, as you are making an investment in your future personal and financial well being.

What is the importance of a franchise lawyer?

It is important that your franchise lawyer has significant experience on the franchisor side of the ball. If a franchise attorney does the majority of their work for franchisees, they may be too pro-franchisee with their advice.

How many attorneys are there in the US?

The fact is that there are over 1 million attorneys in the United States, but there are probably fewer than 2,000 attorneys with any real franchise experience.

Do attorneys have franchise experience?

Unfortunately, the legal profession is highly competitive. And with hundreds of thousands of franchises that have been sold in the United States in the last decade, many attorneys who are not franchise specialists can claim to have franchise experience. But often, that experience may be limited to a review of a franchise disclosure document on ...

Do larger firms have more in the way of “connections” within the franchise community?

Larger firms may have more in the way of “connections” within the franchise community and will often have internal education programs that allows them to “cross-pollinate” when new ideas or issues arise. But larger firms may delegate some of the drafting work to associates (not partners).

Can I pay for franchise legal advice?

In that way, you can be sure that you are not paying for franchise legal advice for a franchise program that ultimately will not work. And since the best franchise consultants will provide you with an initial understanding of the “franchisability” of a concept at no charge, this is often the most economical alternative.

Can a firm delegate drafting to associates?

But larger firms may delegate some of the drafting work to associates (not partners). While this allows them to work at a reduced fee (lower billing rates for associates), it may make them less familiar with your documents when questions arise.

Do transactional attorneys pay more than hourly?

The disadvantage is you might occasionally (rarely, in our experience) pay more than you would hourly. Most transactional attorneys are looking for a long term relationship, so they will often discount their fees to establish your relationship.

What is the job of a franchisee?

Managing a business requires the skills to manage and instruct the people working in the business. A franchisee needs to be aware of his or her strengths and weaknesses, knowing when it’s best to handle something themselves or hire someone for a specific role.

What does a franchisee's goal reveal?

Goals reveal a lot about a person. A potential franchisee who doesn’t have any stated goals might not be the right person for your franchise. Or their goals may not connect to the goals of your franchise system.

What should be a key component in the prospective franchisee’s rationale?

Passion for the brand and industry should be a key component in the prospective franchisee’s rationale. If an interviewee is excited about the industry, they likely will be better equipped to excite other people. A franchisee’s success can be tied to that individual’s passion for the business. 3.

Do franchisees have to have experience?

Most franchisees will not have experience in your industry. That, typically, is what makes joining a franchise so attractive – an existing business foundation and training. Indeed, other job experiences coupled with life experience can offer all the skills that a franchisee needs.

Can a franchise make a profit in the first year?

It’s possible in any business to not make a profit in the first year. Be sure you understand the start-up process. Consider coming onboard armed with a financial plan and cash reserves to support yourself and the business as it gets started. After all, in addition to the actual cost to buy franchise rights, the franchisee will be responsible for the many start-up costs as well.

Is it necessary to have previous experience in franchising?

After all, as a franchisee, you are basically running your “own” business, but doing so under the rules of the franchisor and franchise agreement. Previous experience in franchising or the industry is not essential but ensuring your potential franchisee is clear about the model’s structure is critical. So, make sure your budding entrepreneur ...