When you are buying a franchise, there are people who want to help you, and there are people who can offer the help you really need. It is important to be able to distinguish between the two—not only to avoid wasting money that would be better invested elsewhere, but also to ensure that you are making an informed buying decision. While distinguishing between franchise brokers, franchise consultants and franchise lawyers is confusing for many prospective franchisees, there are clear (and important) differences between them. Here’s what you need to know.
What Does a Franchise Broker Do?
If you attend a franchise convention or start looking for help with buying a franchise online, you will likely come across a franchise broker, if not several. A franchise broker will help you buy a franchise; but, before you hire one, it is important to make sure you have a clear understanding of the broker’s role and his or her relationship with your potential franchisor.
Franchise brokers work with franchisors. They are independent contractors who get paid, typically on commission, to help franchisors sell franchises. While franchise brokers may represent several franchised brands, their ultimate goal is to sell franchises—and not necessarily to match prospective franchisees with the opportunities that are best suited to their specific desires and capabilities.
This means that a franchise broker won’t necessarily have your best interests in mind. A franchise broker will only help you consider franchise opportunities from the brands he or she represents, and a franchise broker will only receive a commission if he or she convinces you to buy a franchise.
What Does a Franchise Consultant Do?
A franchise consultant is typically someone who offers advice on how to go from prospective franchisee to active franchise owner. While there are various “certification” programs out there, a person does not need to have any particular educational background or professional qualifications to hold himself or herself out as a franchise consultant.
As a result, while some franchise consultants are good at what they do and provide value to their clients, others offer very little. Thus, if you are thinking about working with a franchise consultant, it is important to do your research, and you should not be shy about asking lots of questions before you agree to pay a fee.
It is also important to understand that some franchise consultants are also brokers. Many brokers call themselves franchise consultants and offer “add on” services, when their ultimate goal is simply to get you into one of the franchises they represent, no matter what it takes. If you talk to a franchise consultant, you should find out if he or she is also a broker; and, if so, you should independently evaluate the franchise opportunities he or she brings to the table.
What Does a Franchise Lawyer Do?
Now, what about a franchise lawyer? Franchise lawyers are very different from franchise brokers and franchise consultants. When you hire a franchise lawyer to represent you during the buying process, your lawyer will solely have your best interests in mind.
Unlike a broker, a franchise lawyer will not try to talk you into a particular franchise opportunity. Instead, your lawyer will evaluate a franchise opportunity that you bring to the table—and will do so with a focus on examining the legal risks involved and helping you make an informed buying decision.
Additionally, unlike franchise consultants, franchise lawyers are subject to professional standards. All franchise lawyers must be licensed, and they must comply with the Rules of Professional Conduct for lawyers in their state. Among other things, these rules require lawyers to provide competent representation and put their clients’ interests before their own.
Do you really need a lawyer when buying a franchise? Technically, the answer is “No.” You are free to go through the buying process on your own if you choose to do so. You also don’t need to hire a franchise broker or franchise consultant. But there are several reasons why it makes sense to have a franchise lawyer on your side. For example:
- Comparing Franchise Opportunities to Industry Standards – An experienced franchise lawyer will be able to help you compare your chosen franchise opportunity to competing opportunities based on his or her prior work and knowledge of industry standards. This way, you will know if the franchisor is offering the franchise opportunity on reasonable terms.
- Identifying Red Flags in the FDD and Franchise Agreement – Your franchise lawyer will also be able to identify any red flags in the Franchise Disclosure Document (FDD) and franchise agreement. From a lack of experience in the industry to risky indemnification obligations, there are several potential issues that may require careful consideration.
- Helping You Understand What You Can (and Can’t) Negotiate – An experienced franchise lawyer will also be able to explain what you can (and can’t) expect to negotiate in your franchise agreement.
- Negotiating on Your Behalf (if Desired) – If desired, your franchise lawyer can also negotiate appropriate provisions of the franchise agreement for you. Since a franchise broker represents the franchisor, a broker cannot negotiate on your behalf. Additionally, while a franchise consultant may offer to negotiate some of the terms of your agreement, a consultant cannot provide legal advice or legal representation.
- Making an Informed Buying Decision with Your Best Interests in Mind – Ultimately, hiring an experienced franchise lawyer will allow you to feel confident that you are making an informed buying decision with your best interests in mind. This is critical, as the decisions you make during the buying process will affect your personal finances for years to come.
Schedule an Appointment with Franchise Lawyer Jeffrey M. Goldstein
Do you have questions about buying a franchise? If so, we encourage you to contact us to learn more about the options you have available. We work with prospective franchisees nationwide. To speak with franchise lawyer Jeffrey M. Goldstein in confidence, please call 202-293-3947 or request a free initial consultation today.
