Franchises are established for the sole purpose of distributing or selling the products of an already established brand in a target area. Franchise attorneys help businesses and individuals set up franchises successfully. A franchise business model requires the investor to pay a fee to acquire to operate a similar business using the name of the franchisor or the established business. Franchises run for predetermined and specified durations. The working relationship between the franchisor and franchisee should always be detailed in the franchise agreement.
In the US, setting up a franchise involves a lot of things, such as complying with different regulations, incurring costs, signing contractual obligations, and much more. This is why anyone considering running a franchise should contact a franchise attorney who will ensure the deal is not unfavorable to their clients. Additionally, attorneys help clients achieve their business objectives while minimizing the risks of costly disputes. Franchises in the US must be governed by franchise laws.
What Can a Franchise Attorney Do for You?
There are over a million attorneys in the U.S, but only a few have specialized in franchising. General, corporate, and business lawyers, can provide legal counsel on business and other matters–but franchise attorneys will give legal counsel personalized for franchising.
The most important documents you need to look through before making an official commitment are the Franchise Disclosure Document (FDD) and the Franchise Agreement. A typical FDD has between 150- to 200-pages detailing the terms and conditions of the franchise.
By default, FDDs and Franchise Agreements are designed to favor the franchisor. However, you should contact a franchise attorney to guide you through technical language, identify areas to be clarified by the franchisor, and even help in negotiating the terms of the franchise agreement.
The attorney is also capable of obtaining and analyzing the financial data of the franchisor’s main competitors.
What are Franchise Laws?
Franchise laws is the combine the federal and state laws used to regulate franchise agreements concerning the offer, acceptance, legal relationships, and terms of sale. Federal laws require franchisors to provide pre-sale franchise disclosure documents (FDD) to prospective buyers before making a sale offer. At the federal level, more disclosures may be required to supplement the disclosures provided at the federal level.
What is a Franchise Agreement?
- Franchise agreements are binding and legal documents that regulate a franchise. The contents Expectations.
- Franchise fee.
How long do Franchises Last?
Franchise agreements usually run for five to 25 years. However, most average ten years. The agreements are normally designed with the need for future renewal in mind. Most states recognize any perpetual agreements and consider them to be binding. The most common renewal terms are automatic, indefinite, or pre-agreed renewal terms. A franchisee can’t terminate the franchise agreement before the agreed time elapses but can transfer their interest to a third. Otherwise, they’ll be liable for liquidated damages which are equivalent to 3 years royalties, which you’ll be required to pay back.
What can Franchise Attorneys Help Negotiate?
Most components of a franchise agreement are non-negotiable, but attorneys may help negotiate several items including:
Some franchisors are notorious for withdrawing royalty payments from the account of the franchisee, which can result in dire financial consequences to the franchisor. Franchise attorneys help to negotiate an ideal payment schedule for their clients.
Disagreements are normal and inevitable. It’s prudent to be protected when such disputes arise. Franchise attorneys are helpful at such times. They will find a perfect solution that will work for both parties.
Many franchise agreements offer the franchisee exclusive territories. While it sounds great, bear in mind that the definition of “exclusive rights” is different for the franchisor. Sometimes exclusive rights may be so small. A franchise attorney can help negotiate a larger franchise territory, enough for the proper running of the business
Qualifications of Competent Franchise Attorneys
Although any lawyer can make a franchise attorney, due diligence should be done to avoid quacks. A good franchise attorney should score high in the following areas:
- Should be experienced in franchising.
- Should have a good reputation.
- Must be a qualified lawyer.
- Should be able to mediate.
Franchise Agreements Best Practices
Seek Legal Counsel
Most franchisees do not involve attorneys when negotiating with franchisors. Without good legal advice, the franchisee can easily be short-changed or taken advantage of.
Know that “May” has a different meaning from “Shall”
Be clear on the franchisors’ obligations from the word go. May means that they’re not obligated to do something but shall indicate obligation on their part and they’re expected to fulfill the same.
You should enter the franchise knowing that another person’s success is not yours and that you need to toil for the same success.
A franchise aims to provide a beneficial mutual relationship between a franchisor and franchisee, that’s why it’s important to involve a domestic franchise attorney to safeguard the interests of both parties.