If you are thinking about buying a franchise as a way to own your own business, there is a lot you need to know. From the nature of the franchise relationship to the details of your franchise agreement, there are numerous considerations that should weigh into your decision to become a franchisee. While many franchisees are able to find success, the failure rate across the franchise industry is high, and making an informed decision about your franchise investment via a franchise business review is the first step toward building a sustainable business. Attorney Jeff Goldstein has decades of experience as a franchise lawyer, and is available to provide you with the comprehensive franchise business review you need.
What are Franchise Business Reviews?
Franchise business reviews come in many flavors, shapes, and sizes, and this inconsistency covers both subject matter and lawyers. There is no accepted scope of work associated with a “FDD Review” or “Franchise Review”; there is no uniform definition of the term “FDD Review” or “Franchise Review”. This lack of accepted definition results in franchisees comparing apples to oranges, causing far too many franchisees to purchase a franchise review based on cost of the review alone.
Similarly, there is no required number of years that a lawyer must have practiced in the franchise area; nor is there any requirement regarding whether the lawyer must represent exclusively franchisees and not franchisors. This heterogeneity of quality and experience among lawyers many times, again, leads franchisees to attempt to evaluate the merits of franchise legal review services based only on cost.
4 Reasons Why All Prospective Franchisees Need Franchise Business Reviews
1. Buying a Franchise is a Major, Long-Term Investment
You have heard this before too, but it bears repeating: Buying a franchise is a major, long-term investment that could have significant implications for your family’s finances. If you decide to move forward, your decision needs to be based on the advice of experienced professionals who understand what you are getting yourself into.
2. The Franchisor is Putting Its Best Foot Forward
During the buying process, the franchisor is giving you its sales pitch. If you are a strong candidate, it wants you to buy a franchise because it knows that (i) you have a reasonable chance of success, and (ii) even if you don’t succeed, it can kick you out and find someone new. This means that the information you are receiving is skewed, and it means that you need to hire a lawyer to give you a fair and balanced assessment of the quality and viability of the franchise opportunity.
3. The Franchise Agreement Might Not Say What You Think It Says
Franchise agreements are long and complex contracts with provisions that impact others and with language that even many lawyers do not understand. Additionally, while the Franchise Disclosure Document (FDD) should accurately explain the key terms of the franchise agreement, this is not always the case. During your franchise business review, your attorney will make sure you have a clear understanding of your contractual obligations and your (limited) contractual rights.
4. You May Need to Negotiate the Franchise Agreement
Franchise agreements are not take-it-or-leave-it contracts. While the franchisor’s salespeople may try to get you to sign the agreement as-is, you need to ensure that you negotiate any necessary protections. During your franchise business review, your attorney can identify the key terms that you should try to negotiate; and, if desired, your attorney can negotiate these terms on your behalf.
This list is not exhaustive, but these are some of the most important reasons why all prospective franchisees need franchise business reviews. To learn more, contact us for a free initial consultation.
Four Tiers of Franchise Business Review Services
When considering a franchise, it is important to have the Franchise Disclosure Document (FDD) and franchise agreement reviewed by an experienced franchise attorney. You need to be aware of the pitfalls involved, and you need to make your buying decision based on an unbiased assessment of the franchisor and its franchise opportunity. It may be necessary to negotiate key provisions of the franchise agreement to mitigate your financial risk as well; and, in order to do so, you will need experienced legal representation.
We offer four tiers of flat-fee franchise business review services for prospective franchisees. All reviews are conducted by Jeffrey M. Goldstein, a franchise lawyer who has over 30 years’ experience exclusively representing franchisees and dealers. Our flat-fee services include:
Franchise Business Review Program No. 1
Unlike other firms that provide their clients with a dense and legalese-filled memorandum, we believe in communicating directly with our clients and tailoring our advice to their specific questions and concerns. Our base franchise business review program involves a full review of the FDD and franchise agreement and two in-depth phone conferences between you and attorney Jeffrey M. Goldstein.
The first phone conference starts with an in-depth interview where Mr. Goldstein will focus on you. This includes learning about your background, your financial resources and restrains, your due diligence efforts to date, and your personal aptitudes and interests. After the interview, Mr. Goldstein will provide guidance for your due diligence tasks while he reviews the FDD and franchise agreement which you can use as a blueprint for gathering the information you need to make an informed buying decision.
The second phone conference typically lasts about two hours and involves an in-depth review and discussion of all of the key aspects of the FDD and franchise agreement. Mr. Goldstein will discuss the biggest risks, the most-favorable provisions of the franchise agreement compared to competitors’ offerings, and everything else you need to know about your legal rights and obligations. He will educate you on the general legal risks involved with franchise ownership, and he will answer any questions you may have about what you can expect as a franchisee.
Franchise Business Review Program No. 2
Our second franchise business review program includes everything covered under Franchise Review Program No. 1 plus direct negotiation with the franchisor. Mr. Goldstein will work with you to compile a list of terms to negotiate; and, based on this discussion, he will submit and negotiate proposed modifications to the franchise agreement on your behalf.
Franchise Business Review Program No. 3
For existing franchisees who do not wish to receive the full review covered under our Franchise Review Program No. 1, we offer an abbreviated review package which focuses primarily on assessing the legal terms of the proposed renewal franchise agreement. We offer this package to new franchisees as well, although we believe that all new and existing franchisees will receive the most benefit from a comprehensive franchise business review. After reviewing the franchise agreement, Mr. Goldstein will schedule a one-hour conference call to discuss his conclusions with you in detail.
Franchise Business Review Program No. 4
Our final franchise business review package is for clients who have only have certain specific questions that they want answered. With this option, you will submit a list of seven to ten questions that you want Mr. Goldstein to answer. Mr. Goldstein will review your franchise agreement and then schedule a one-hour conference call to provide you with the specific answers that you requested.
Learn more about each of our flat-fee franchise business review packages.
Understanding Your Franchise Opportunity: FDD vs. Franchise Agreement
When a franchisor considers you to be a viable candidate for a franchise, it will provide you with two main legal documents: its FDD and its standard franchise agreement. The FDD is required by law; and, despite detailed disclosure requirements, franchisors often succeed in providing surprisingly little valuable information to prospective franchisees. The franchise agreement is the document that will govern your relationship with the franchisor, and franchise agreements are almost universally heavily one-sided in favor of the franchisor. While some states have franchise relationship laws that provide limited protections to franchisees, as a franchisee, you need to understand that the vast majority (if not all) of in your franchise agreement will be legally binding.
Understanding Your Franchise Opportunity: Protecting Yourself from the Unexpected
If the franchise agreement governs your franchise, why do you need to know what is in the FDD? Actually, there are several reasons. A properly-prepared FDD should provide reliable information about the franchisor’s credentials, the financial aspects of the franchise, franchisee renewals and terminations, and other material information about the franchise opportunity. Overlooking the FDD is a mistake, and it is one that leaves many franchisees shaking their heads down the line. Learn more with these free resources from firm founder and 30-year franchise attorney Jeffrey M. Goldstein:
- Understanding Your Franchisor’s FDD – Part 1 (Items 1 through 7)
- Understanding Your Franchisor’s FDD – Part 2 (Items 8 through 14)
- Understanding Your Franchisor’s FDD – Part 3 (Items 15 through 23)
- How Much Does It Really Cost to Own a Franchise?
- What Can You Really Hope to Negotiate in Your Franchise Agreement?
- 10 Key Considerations for Due Diligence in Purchasing a Franchise
Get Started With a Free Consultation to Discuss Your Franchise Business Review
For more information about the risks involved in buying a franchise or our fixed-fee services for prospective franchisees, please contact us for a complimentary initial consultation. With offices in Washington D.C., we represent individuals and groups nationwide. To discuss a franchise business review with franchise attorney Jeffrey M. Goldstein, please call (202) 293-3947 or inquire online now.