Sep 23, 2020 - Blog, Franchise Articles by |

The Right Lawyer Produces The Higher Quality Franchise Review

 Unfortunately, the overwhelming majority of lawyers providing franchise agreement or FDD reviews produce a written memorandum for the client allegedly ‘summarizing’ the 300+ pages of the FDD, the franchise agreement or both. This is in almost all cases a waste of time, money and effort. In almost all cases, such lawyer memos are the result of a young associate’s or paralegal’s ‘filling in the blanks’ on a ‘form memo’ already on the lawyer’s hard drive.

A more complete and highly accurate ‘summary’ of the terms in the franchise agreement is already incorporated in the FDD. Should a dispute between you and the franchisor later arise, the Court will not be interested in what your lawyer’s ‘summary memo’ told you about the terms of the franchise agreement; instead, the Court will look to the franchise agreement (and infrequently to the FDD). From a common sense point of view, the provision by your lawyer of another 15 page summary memorandum, on top of a 300+ page FDD and a 60+ page Franchise Agreement is relatively useless.

Then why do lawyers do this? Very simply it is many times much cheaper and quicker for a lawyer to have his or her associate or paralegal ‘fill in the blanks’ on a form memo instead of personally doing a full and complete evaluation of each of the provisions of the franchise agreement. In addition, many lawyers who practice on behalf of both franchisors and franchisees do not want to uncover in public all of the dirty details in the franchise agreement. Exposing all of the hazards in a franchise agreement would require the lawyer to ‘do battle’ with the franchisor, which, if the lawyer represents both franchisors and franchisees, is a large future potential client.

The cursory ‘fill-in-the-blank’ legal review memo also allows many lawyers to represent that they are ‘deal makers, not deal breakers.’ In the franchise context this is preposterous and alarming. One of the most glaring market deficiencies in the franchise sales market is the lack of information regarding the consequences of terms in the franchise agreement. The foremost job of the franchise attorney assisting a franchisee with purchasing a franchise is to explain in prolific detail the significance of the major terms in the franchise agreement. In turn, explaining the significance of these terms requires an analysis of the probability that each clause will be used offensively by the franchisor, and the magnitude of the related harm to the franchisee from such use by the franchisor. A form memo simply cannot accurately, fully, and meaningfully carry out this crucial analysis; indeed, it covers up some of the most damaging risks of the franchise.

Overall, the document could be helpful, but your meeting with the franchise lawyer and your understanding of your franchise business review will determine if your lawyer is the right one for you. If you find you still have questions or if you feel you aren’t protected, contact the Goldstein Law Firm today.

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