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The franchise industry is booming. According to the International Franchise Association’s Franchise Business Economic Outlook for 2016, the number of franchised outlets, number of franchise employees, and gross domestic product (GDP) from franchised businesses all increased more than expected during 2015. Last year’s growth figures exceeded those from 2014, and the International Franchise Association expects to see similar growth in 2016. For franchisees, the franchise model has its benefits. However, these benefits come with strict limitations as well. So, if you want to own your own business, is a franchise worth it? Benefits of Buying a Franchise Talk to any franchise consultant, and you will hear pretty much the same story about why franchising is a smart alternative to building an independent business from the ground up. Generally speaking, the hallmark benefits of buying a franchise include: Brand Recognition – Customers who want to know what to expect rely heavily on brand recognition (consciously or not) in deciding where to spend their money. Unlike starting a business from scratch, with a franchise you have instant credibility. Proven System – Franchisors offer proven systems, covering everything from site selection and trade dress to point-of-sale technology and back-end financial management. When you buy a franchise, you are buying the right to benefit from the franchisor’s background and expertise. Franchisor Support – Franchisors have an interest in making sure their franchisees are successful. Successful outlets mean more royalties and better selling points for new prospective franchisees. Of course, some franchise systems offer more […]

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As a franchisee, there are few things worse than coming to the realization that you may need to sue your franchisor. Unfortunately, for many franchisees, this is reality, and taking legal action is the only way to protect their investment and their legal rights. If you are at the point of considering franchise litigation, this article provides an overview of potential causes of action that franchisees can assert against their franchisors. To find out what claims you may have available, we encourage you to contact us immediately for a free consultation. Common Claims in Franchise Litigation Franchise Disclosure Violations Under federal law and the laws of various states around the country, franchisors owe a duty to provide timely and accurate disclosures to potential franchisees. These disclosures must be made in the form of a Franchise Disclosure Document (FDD), which, depending on the state where you live, may need to be registered before the franchisor can begin selling franchises. Some common forms of franchise disclosure violations include: Your franchisor failed to provide you with an up-to-date FDD Your franchisor sold you a franchise too soon after providing you with its FDD Your franchisor included misrepresentations or exaggerations in its FDD Your franchisor underestimated the initial investment to open your franchise in Item 7 of the FDD Your franchisor provided an inaccurate or unsubstantiated “financial performance representation” Breaches of the Franchise Agreement While most franchise agreements are fairly limited in terms of establishing affirmative obligations for the franchisor, there are still typically […]

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If your aspirations as a franchisee extend beyond opening a single location, you potentially have a few different options available. Franchisors often favor selling new territories to well-qualified and trusted franchisees, and as a result over the years the industry has developed a number of “standard” methods for providing expansion options to franchisees seeking multi-unit opportunities. These methods include: Area Development Agreements Rights of First Refusal Options for Additional Territories Methods for Securing Multi-Unit Franchise Development Rights 1. Area Development Agreements When you sign an Area Development Agreement, you receive the right to open multiple outlets. However, you also have the obligation to open these outlets – most likely on a very tight schedule or within a very limited period of time. As a result, when considering an Area Development Agreement, it is critical to thoroughly assess both the market conditions and your financial capacity to ensure that you are not taking on an unviable business or biting off more than you can chew. Importantly, when you enter into an Area Development Agreement, you will still be required to sign a Franchise Agreement for each individual outlet. As an area developer, carefully negotiating both the Area Development Agreement and the individual Franchise Agreements is critical to protecting your multi-unit development and individual franchise rights. Remember, franchisors want as many protections as possible, and it is very possible that your franchisor’s standard agreements allow for termination of all of your rights if you fail to meet your development schedule or if […]

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When evaluating a new franchise opportunity, there are plenty of considerations to keep in mind. What is the best location? Will you need to hire employees? If so, how can you find people you can trust? How and when will you roll out your initial advertising campaign? Amidst the excitement and practicalities involved in opening a franchised business, it is easy to want to jump ahead. Unfortunately, for some franchisees, this means overlooking a key step: hiring an experienced franchise attorney to review and help you understand the franchise agreement. The Importance of Negotiating with Your Franchisor When prospective franchisees decide not to hire an attorney, there are usually a couple of reasons why. First, they assume that the franchise agreement is non-negotiable. Or, even if it is negotiable, they do not want to “get off on the wrong foot” by getting into legal negotiations with their new franchisor. Second, they assume that all franchise agreements are the same. They are set on getting into the world of franchising, and they take for granted that submitting to the terms of a franchisor-friendly contract is just part of the process. However, the truth of the matter is that franchisees can (and should) negotiate their franchise agreements, and franchise agreement terms can vary widely from one system to the next. Quality franchisors should be open to – and even expect – reasonable negotiations, and in many cases negotiations will simply focus on clarifying ambiguities and bringing the terms of the agreement up […]

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Immediate Opening For Third Year Law Student or Recent Graduate Small litigation boutique in Washington, DC with national practice seeks Third Year Law Student for part-time work. This will involve litigation assignments including pleadings preparation. Practice is national, and contact with partner and clients is almost exclusively by internet, phone and email. Hourly rates are negotiable based on experience.  The estimated hourly hours per week are 10-15. A commitment through the end of the school year is required. Interested in Applying? Interested candidates should be ready to begin work immediately, and express interest by sending a copy via Email of a letter of interest, your resume and two writing samples to: Jeffrey Goldstein; Goldstein Law Firm 1629 K ST. N.W. Suite 300 Washington D.C., 20006 jgoldstein@goldlawgroup.com goldlawgroup.com 202-293-3947 About The Goldstein Law Firm The Goldstein Law Firm is one of only four national franchise law firms in the country that represents exclusively franchisees and dealers. Jeff Goldstein’s practice covers prolific and myriad commercial complex litigation matters, and Jeff is regularly sought out by franchisees and dealers from foreign countries (e.g., UAE, South America, United Kingdom) to represent them in disputes with United States franchisors and suppliers. Under the formation, growth and supervision of Jeff Goldstein, the law firm is recognized as a top tier franchise law firm for franchisees and dealers.

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Immediate Opening For Second or Third Year Law Student or Recent Graduate Small litigation boutique in Washington, DC with national practice seeks Second or Third Year Law Student for short legal research and writing assignments. Employment could lead to litigation assignments including pleadings preparation. Practice is national, and contact with clients is almost exclusively by internet, phone and email. Similarly, assignments and contact with applicant by Firm will be by internet, phone and email. Hourly rates are negotiable based on experience.  The estimated hourly hours per week are 10. A commitment through the end of the school year is encouraged. Interested in Applying? Interested candidates should be ready to begin work immediately, and express interest by sending a copy via Email only of your resume and two writing samples to: Jeffrey Goldstein; Goldstein Law Firm 1629 K ST. N.W. Suite 300 Washington D.C., 20006 jgoldstein@goldlawgroup.com goldlawgroup.com 202-293-3947 About The Goldstein Law Firm The Goldstein Law Firm is one of only four national franchise law firms in the country that represents exclusively franchisees and dealers. Jeff Goldstein’s practice covers prolific and myriad commercial complex litigation matters, and Jeff is regularly sought out by franchisees and dealers from foreign countries (e.g., UAE, South America, United Kingdom) to represent them in disputes with United States franchisors and suppliers. Under the formation, growth and supervision of Jeff Goldstein, the law firm is recognized as a top tier franchise law firm for franchisees and dealers.

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If you are in the process of performing your due diligence on a franchise opportunity, you are probably struggling to comprehend the seemingly-unending legalese in the franchise agreement. Indeed, even the best franchise lawyer struggles to interpret what the drafters intended when they wrote some of the language in many of these agreement templates that, frankly, should have been overhauled long, long ago. That said, most franchise agreement provisions can be interpreted, and the news often is not good for prospective franchisees. Based on more than 30 years of franchise law experience, here are 10 of the absolute worst provisions in franchise agreements: 1. Mandatory Mediation and Arbitration. We’ll start with a big one: Many franchise agreements contain provisions that require franchisees to submit all disputes to mediation or arbitration (or both) before they can enforce their rights in court. While mediation and arbitration have their virtues, these provisions are often designed to make it harder (and more expensive) for franchisees to pursue valid claims against their franchisor. 2. Choice of Venue. In addition, franchise agreements will usually contain provisions stating that all disputes are subject to jurisdiction and venue in the state (and sometimes the city or county) where the franchisor’s headquarters are located. This, again, makes it more difficult and expensive for the franchisee – and provides home field advantage for the franchisor. 3. Non-Competition Covenants. Non-competition covenants in franchise agreements will often prohibit franchisees from operating independently once their franchise agreement expires. While there are some legitimate […]

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When you purchased your franchise, hopefully you went into it with the understanding that, at some point, your franchise rights would come to an end. If that time has come, you need to make a decision about what you are going to do next. At a high level, you have two primary options. You can either: Let your franchise agreement expire; or, Seek to renew for another franchise term. Letting Your Franchise Agreement Expire If you are ready for your franchise venture to come to an end, you may simply choose to let your franchise agreement expire. But, before you do, there are a few key provisions in most franchise agreements that you will want to keep in mind: Non-Competition. It is very possible that your franchise agreement contains a “non-competition” covenant that prevents you from competing with the franchisor and its other franchisees. What exactly it means to “compete” will depend on the specific language in your contract. But, at a minimum, you can generally expect to be prohibited from opening a similar type of business within a certain radius of your franchised outlet for at least a couple of years. Non-Solicitation. In addition to non-competition covenants, most franchise agreements also include provisions that prohibit solicitation of your franchise customers – for any business whatsoever. That customer list that you thought was yours? It actually belongs to your franchisor. Post-Termination Obligations. When your franchise expires, you will be expected to completely de-brand and stop use of any and all […]

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As a franchisee (or prospective franchisee), among the many important issues you need to consider is the question of geographic protection. When you buy a franchise, you expect to benefit from the franchisor’s brand, systems and goodwill, and the last thing you want is for another franchisee – or even the franchisor – to end up using these against you. When many people hear that they have a “territory,” they assume this means that their territory is exclusive—that is, that no one else within the franchise system will be able to compete against them in their territory. Unfortunately, this isn’t always the case, and the actual territorial rights that are offered (if any) often are not clear in the franchise agreement or the Franchise Disclosure Document (FDD). Exclusive vs. Protected Territories Although they are often used interchangeably, “exclusive” and “protected” can actually have different meanings in the franchise context. If your franchise territory is truly exclusive, your business should be the only source of the franchisor’s goods or services in the territory. On the other hand, if your territory is merely protected, then your franchise agreement may authorize certain forms of competition, such as franchisor sales through alternative channels of distribution (i.e. the internet). As a third option, some franchise systems do not offer any territorial protection at all. In these systems, the franchisor is free to open competing outlets and use alternative channels wherever it pleases. While you may initially be willing to trust your franchisor not to “cannibalize” […]

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When you are considering a new franchise opportunity, the franchisor will provide you with two main legal documents: a Franchise Disclosure Document (FDD) and a franchise agreement (at least initially, the franchise agreement will be included as an exhibit or attachment to the FDD). By federal regulation, the franchisor must provide you with the FDD at least 14 days before you sign the franchise agreement, and some states’ franchise laws require even earlier disclosure. Part of the reason for this is that these documents are exceedingly complex (and long), and it is critical to make sure that you have a thorough understanding of the franchise opportunity before you sign on the dotted line. The Importance of Understanding Your Franchise Agreement and FDD So, should you hire an attorney to review your franchise agreement and FDD? Absolutely. Despite the franchise relationship and disclosure laws that exist in some states, most franchise relationships are still extremely one-sided. If you are not familiar with the way FDDs and franchise agreements are written, you will almost certainly overlook important issues that could have drastic financial and legal implications over the life of your franchise. An experienced franchise lawyer will be able to assess your franchise opportunity in light of industry standards and with an eye toward ensuring that you have reasonable protections in the event that something goes wrong. Top Reasons to Hire a Franchise Agreement Lawyer Before You Sign a Franchise Agreement With these considerations in mind, here are five of the top […]

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