While all franchises are businesses, hiring a general business lawyer to handle franchisee issues can be a costly mistake. A knowledgeable franchise lawyer will have extensive experience with state and federal franchise laws, understands a franchise disclosure document (FDD) frontward and backward, and often focuses all or most of their practice on representing franchisees.
A general business law attorney may not be as familiar with FDDs and the ways they favor franchisors. The terms stipulated in these documents are usually nonnegotiable, but you will want to review every aspect of the FDD with a franchisee lawyer who can point out the important rules and restrictions.
Parsing the franchise agreement
In addition to the FDD, there is the franchise agreement – the actual contract between the franchisee and the franchisor. A standard franchise agreement will spell out terms of the partnership, including:
- Restrictions on your rights to transfer the business
- Exclusive or non-exclusive rights to a territory
- Rights to intellectual property
- How disputes will be resolved (i.e. mandatory arbitration)
- Rights and remedies in the event of default
An experienced franchisee attorney will help ensure the franchise agreement includes protections for the franchisee, including territorial protection, renewal rights and noncompete agreements.
An indispensable partner
Although many franchise lawyers focus on working exclusively or mostly with franchisees, they are adept at other aspects of business law. You should be able to rely on your franchise lawyer for help selecting the right business entity, negotiating and drafting building lease agreements, drafting and reviewing employee contracts and handbooks, and advising you on numerous other business law matters.
Franchise attorneys have seen other franchisees succeed and fail. They have a wealth of knowledge about factors that contribute to the success of a franchise and factors that signal high risk. The right franchisee lawyer can truly become a crucial business partner.