Some Legal Considerations to Think About Before Purchasing a Franchise
Buying a franchise is an exciting way to become a business owner that offers a lot of unique advantages to the right owner in the right market. This typically includes a large support system and elevated brand recognition but comes in exchange for the typical independence a small business owner who doesn’t own a franchise enjoys.
When it comes down to it, owning a franchise is not for every business owner and the decision to purchase one should be carefully examined to understand both the pros and cons before deciding. Keep in mind that not all franchisors offer the same advantages and level of support. One of the first things you need to do before deciding to become a franchise owner is research to determine which franchises have the strongest track records. There are also legal considerations.
Legal Considerations of Purchasing a Franchise
You may have spoken with a franchise sales director who told you that you didn’t need an attorney. They may also tell you that there is no room for negotiation. The truth isn’t so black and white – especially when it comes to negotiations. The longevity of a franchise, its relative market success or clearly its lack of track record will impact the level of negotiation that can be expected. Typically, you’ll have the chance to be able to ask the right question that will put anything about the franchise agreement you’d like to change on the table. Having an attorney by your side will help you identify and leverage key opportunities during the negotiation process. So, keep this in mind when a franchise director tells you that you won’t need an attorney. Besides, your attorney can always be the “bad guy” and ask the questions that you want answers to and not affect your relationship as a franchisee with the franchisor.
Understanding your FDD and Franchise Agreement
Another reason you’ll want to have an experienced business attorney involved in your transaction is that they’ll be able to help you understand the typically long disclosure documents and hard to process contracts on which franchise agreements are based. Some language can be difficult to understand and even appear to conflict with other parts of the contract. An attorney can help you know what you are signing before you ever put pen to paper. Even where you have limited negotiation potential, understanding your rights and remedies in any agreement is essential to your ongoing business.
Your attorney may help you recognize and to protect you from potential red flag issues as they crop up during the due diligence and negotiation process. They can help you keep your eyes wide open and help cover all the possible legal bases that may be significant or problematic with your chosen franchise or industry.
This is a huge decision that will shape much of how you will spend your life in the years to come. It’s just too important to NOT have an attorney there to advise and consult with.
A business attorney can help you negotiate a franchise agreement that protects you and your business. But there are many more things a business attorney can do besides just this. If you have any additional questions about franchises or wish to discuss other legal issues, call Stephen Rizzieri at 214.434.1017 or fill out the form on our site today.