Contrary to what most people believe, the heart and soul of a franchise isn’t a recognizable logo and a service. Instead, the core of a franchise is a contract.
That’s why experienced entrepreneurs begin searching for a great attorney to represent them before they invest in any franchise. They know that an attorney will not only help them analyze the proposed deal, but that the lawyer can also help structure their company, conduct due diligence, analyze their financial liability, reduce other risks and much more.
What Does a Franchise Lawyer Do?
In addition to the traditional tasks that business attorneys handle for a client, franchise attorneys also review and negotiate franchise agreements. They analyze the Franchise Disclosure Document (FDD), the document that explains the parties’ obligations.
And while franchise deals are often presented as a take-it-or-leave-it offer, franchise attorneys may negotiate better terms for a franchisee.
Franchise agreement and Franchise Disclosure Document review
As they analyze the franchise agreement and the FDD, a franchise attorney should identify both parties’ obligations under the contracts, from financing to operational requirements.
When doing this analysis, they will list the risks each party has under the agreement: The franchise attorney should spot if any provisions are unenforceable. They should also distinguish which conditions are legal but likely to cause problems during the franchise’s operation.
Legal support beyond signing
Franchise attorneys may provide other legal support beyond the FDD and agreement. For example, they can help you with investors. They can set up your corporate structure and then establish compliance programs for your ongoing business.
Franchise attorneys can help conduct due diligence, examining franchisors’ claims and their business realities. They can review and negotiate related contracts—from building and equipment leases to vendor agreements—so you get the best possible deals.
Attorneys can also help clarify your obligations under the contract and relevant law; therefore, it is advisable to continue to have an attorney during franchise operation. They can also prevent disputes and help resolve those that occur.
Franchise lawyer vs general business lawyer
While some law firms focus exclusively on franchise work, some attorneys do not exclusively brand themselves as “franchise lawyers.” Instead, they incorporate their franchise work into a broader law practice. So why might you choose a franchise lawyer over one who combines a franchise practice with other legal work?
Franchise law is a highly technical field, and you don’t want someone learning on the job. Ideally, you want someone who does franchise-related work as part of their day-to-day practice. Franchise attorneys may often be more efficient, with defined processes in place for everything you will need during your representation.
An experienced franchise attorney also likely knows the market—what other franchisees have paid for similar deals and which aspects of the agreement a franchisor should be more willing to negotiate on.
While a full-time franchise attorney typically brings advantages to the franchise execution itself, depending on your needs and work, you may prefer someone with experience in other fields as well. For example, automotive work is a heavily-regulated industry, so franchisees in car repair may benefit from attorneys with relevant experience. Similarly, if you’re concerned about trademark and copyright issues, an attorney who also practices intellectual property law might be worth considering.
When Should You Hire a Franchise Lawyer?
If you are considering becoming a franchisee, it may already be time to hire an attorney. If that isn’t possible, hire an attorney before signing a franchise agreement. Give an attorney time to assess the materials before you must respond to the franchisor. You should also have an attorney represent you during contract negotiations.
And if it seems too premature to hire an attorney, at least begin researching attorneys to see who might be a good fit for you. Franchisors often pressure potential franchisees into responding quickly. If you don’t already have an attorney in place, you may end up with an attorney because they’re available, rather than someone who is best for you and your business.
How Much does a Franchise Lawyer Cost in the U.S.?
Franchisees’ legal fees typically begin with an attorney’s assessment of an FDD—which frequently runs from $1,500-$3,000.
The depth of FDD analysis, a deal’s complexity, other asset agreements and transfers of ownership can all impact the cost. The attorneys’ experience, the firm size and other factors can also affect rates.
Typical fee structure
American franchise lawyers typically follow one of these models for their franchise fees:
- They offer a flat fee that covers all of the necessary tasks relating to a franchise.
- They offer a task-based fee structure (e.g., one fee for reviewing the FDD, another fee for preparing corporate documents).
- They charge by the hour.
Firms also often may do some sort of variation of these. For example, a firm may offer to review an FDD on a fixed rate basis but then charge by the hour when its attorneys negotiate the franchise agreement.
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How to find the right franchise lawyer in the U.S.
While franchise-related work can be technical, there are no licensing requirements that someone must satisfy to become a franchise lawyer, so it’s important to research attorneys before hiring anyone.
You might begin by asking franchisees or franchisors whom they recommend. Referrals are a great source of information.
Then check out attorneys’ websites and other sources to learn about their experience in franchising, and don’t be afraid to ask them about their work.
Look for attorneys who have been honored by independent authorities and peers. For example, ”Franchise Times” publishes an annual “Legal Eagles,” a listing of the nation’s best franchise attorneys.
Identify leaders through their involvement in the American Bar Association’s Forum on Franchising, International Franchise Association, and legal organizations. Search for those who contribute to “Franchise Law Journal” and those who teach other lawyers their craft.
And if your possible attorneys represent both franchisees and franchisors, ask how they handle potential conflicts of interest.
Key elements to look for in a franchise lawyer
Look for attorneys who….
- Have regular experience working on franchise deals that are similar to your own
- Have been recognized by peers for their client work
- Take leadership roles in franchise law-related organizations
- Write and teach about franchise law
- Are recommended by trusted clients
- Provide clear information relating to their services and their fees
Does the U.S. Have an Official Directory of Franchise Lawyers?
While there is no official directory for franchise attorneys, respected legal directories such as Martindale-Hubbell, Chambers and Super Lawyers rely on research and peer interviews to help you identify qualified franchise attorneys.
New entrepreneurs may balk at the idea of paying a lawyer $2,000 or more just to read a FDD. They may object to shelling out a few thousand dollars for an attorney who responds to a largely preset contract.
However, savvy investors understand those are paltry sums in comparison to the money they could gain over the life of a successful franchise. And perhaps more importantly, the franchise attorneys’ fees are much less than what that investor stands to lose if they sign a bad deal.
This content is provided for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations vary by state and individual circumstances and may change over time. Readers should consult a qualified attorney, tax professional, or other licensed professional regarding their specific situation. Nothing herein creates an attorney-client relationship.
