By Michael Seid, Managing Director, MSA Worldwide
A franchise agreement is a contract; it identifies the rights and obligations of both the franchisor and the franchisee, so any attorney who is competent to review a contract should be able to review a franchise agreement, right? Likely not. However, there is a major distinction between a franchise and the manner in which a franchise operates and many other forms of distribution and business relationships.
The linchpin of franchising is the ability to duplicate a business concept and provide a consistent product or service to the public. Indeed, it is this consistency that enables franchisors to build a brand and a network of franchised locations that reinforce rather than distort the brand image. It is this dependency on consistency, coupled with the franchisor’s responsibility to protect their brand, that dictates many of the issues covered in a franchise agreement and cause these agreements to be viewed as “one-sided” by the inexperienced attorney.
Attorneys unfamiliar with the idiosyncrasies of franchising and the relationship between a franchisor and its franchisees will have no trouble pointing out to their client that the agreement is one-sided and favors the franchisor. The prospective franchisee will then prepare to discuss these points with the franchisor only to find out that their requests for change are unheeded. The prospective franchisee is understandably frustrated, having invested time and money to have the agreement reviewed.
This by no means indicates that all franchise agreements are alike, or that if you are thinking about investing in a franchise you should forgo having your agreement reviewed by an attorney. However, you can save yourself a lot of angst by going to an attorney experienced in franchising. A qualified franchise attorney can separate contract terms and obligations that are “acceptable” or a “common practice” in a franchise relationship from those that may be excessive or unusual. They can help you negotiate with a franchisor by explaining what changes the franchisor might be willing to make and which ones will likely be rejected. An attorney with franchise experience can also assist you in evaluating the franchise opportunity and writing your own business plan.
Finding a qualified franchise attorney is not a difficult task. If possible, you will want an attorney who is experienced working with franchisees. If you know someone (or know someone who knows someone) who has invested in a franchise, you may want to ask them for a referral. You can also turn to the attorney who prepared your will or represented you at your house closing. They may also be able to refer you to a franchise attorney, as can your accountant or other professional advisors.
If your networking efforts fail to uncover a franchise attorney, your state Bar Association should be able to provide information. Attorneys that routinely practice franchise law are likely to be members of the American Bar Association’s Franchising Forum. You can get information on ABA Forum members at www.abanet.org/forums/franchising. The International Franchise Association (IFA) is another good source of contact information for franchise attorneys. Go to www.franchise.org, click on the supplier business district, and then go to attorneys.
As is true when hiring any professional advisor, it pays to take the time to talk with more than one attorney to find one with whom you feel comfortable. We strongly recommend that you have an attorney and other professional advisors assist you in your due diligence before you invest in a franchise. Using an experienced franchise attorney will simply yield better results.
Do you have further questions about finding a franchise attorney?
MSA can provide expert guidance and resources on the legal requirements of franchising.