In contrast to the ‘approved franchisor vendor’ legal summary memo approach to doing a franchise review, the Goldstein Law Firm, PLLC embraces a hands-on approach on all reviews. Below are listed several franchise review programs, each of which involves the direct and personal participation of our senior franchise litigation partner, Jeffrey M. Goldstein.
Franchise Review Program No. 1
The Goldstein Law Firm PLLC believes that all explanations and summarizations of the concepts and terms in the Franchise Agreement should be relayed to the franchisee orally on the phone or in person, not in a memorandum; this allows for all of the franchisee’s questions, misperceptions and reservations to be addressed at the time they naturally occur to the franchisee. In essence, this review involves a full review of the franchise agreement and two very lengthy phone conference calls with the franchisee:
1. Background Interview (First Conference Call)
The background interview focuses on obtaining information involving the following: (1) the franchisee’s educational and professional background; (2) the franchisee’s financial resources and restraints; (3) what efforts the franchisee has undertaken in his or her due diligence; and (4) the franchisee’s aptitudes and interests. These allow the attorney to form some beliefs regarding whether the franchisee is well-suited to being a franchisee in general or in the specific system in particular. Mismatches frequently occur.
The Background Interview process finishes with the lawyer providing guidance regarding due diligence tasks that the franchisee should carry out before doing a final review of the franchise agreement and making a decision to sign a franchise agreement. This guidance gives the franchisee a blueprint for obtaining very specific relevant and helpful information from current and former franchisees, the franchisor itself, competitors and third parties.
2. Full In-Depth Review and Analysis of Franchise Agreement (Second Conference Call):
- Lawyer discussion of his examination of FDD and Franchise Agreement.
- 2 hours (est.) of phone conference time with attorney to discuss the hidden risks of the franchise agreement. A few of the many issues evaluated and discussed include the following:
- Territorial Rights
- Cure and Default Periods for non-complianceo Venue and Forum of Potential Litigation
- Renewal obligations and requirements o Performance standards
- Right of Franchisee to terminate
- Supplier and equipment purchase requirements; sole sourcing o Marketing
- Ability to sell or assign the franchise o Rights to training and assistance
- Covenants Not to Compete o Unilateral Modifications
- Confidentiality Requirements o Lack of Franchisor obligations o Duration of the franchise
- Franchisor Right of first refusal
- Personal guaranty
- Opening Requirements
- Cross Default
- Requirement to devote full time to endeavor
- Franchisor right to impose additional fees and costs
- Franchisor obligations and restrictions regarding marketing and advertising
- Right to purchase additional franchises
- Pricing Requirements
- Client Education regarding potential risks of the franchise investment:
- Potential loss of entire franchise investment, including liability on loans associated with franchise
- Potential liability for future royalties even after termination o Post-termination or expiration obligations
- Inability to make independent operational and financial decisions o No general legal requirement that franchisor operate to protect the franchisee’s business
- No general legal requirement that the franchisor keep the franchise system up to date operationally or competitively
- No general legal requirement that the franchisor act reasonably in developing and modifying the business model
- Amount of Time and Money Franchisee must invest and have on hand to open and operate the business
- Estimated Sample Total Fixed Cost for one franchise agreement at Goldstein Law Firm, PLLC: $1650
- Estimated Sample Total Fixed Cost for one franchise agreement at Competitors Law Firms: $1300 – $3500
Franchise Review Program No. 2
After we complete our review, some franchisees request that the Firm attempt to negotiate modifications with the franchisor based on our full franchise review, described above. In turn, some franchisees choose to negotiate directly with the franchisor regarding the list we compile. And, thereafter, some franchisees ask that the Firm review and approve any written modifications that they obtain from the franchisor. We also if requested many times handle the negotiations directly with the franchisor.
- Estimated Sample Total Fixed Cost for Negotiating one franchise agreement at Goldstein Law Firm, PLLC: $500 (if purchased with Option No. 1 above)
- Estimated Sample Cost for negotiation of one franchise agreement at Competitors’ Law Firms: $750 – $3500 (hourly fees usually required by competitors’ law firms)
Abbreviated Franchise Review Program No. 3
Some clients, usually those who are current franchisees, believe they do not need a full franchise review, as described above. Although our belief is that regardless of time in the industry a full franchise review should be conducted for every purchase of a new franchise, we offer an abbreviated analysis of the proposed franchise purchase. This program does not seek to cover all of the aspects and issues covered by Franchise Review Program No. 1, and it focuses proportionally on the legal aspects of the proposed new franchise agreement. This program is limited to an abbreviated review of the major provisions of the franchise agreement, and includes a one-hour conference call.
- Estimated Sample Total Fixed Cost for Abbreviated Review Program No. 3 at Goldstein Law Firm, PLLC: $1200
- Estimated Sample Cost for Abbreviated Review Program No. 3 at Competitors’ Law Firms: $1000 – $2500
Abbreviated Franchise Discussion Program No. 4
Finally, some clients wish only to have their specific questions about the franchise agreement answered. For this program, the client sends to the Firm a bullet-type list of questions about the franchise agreement that can be answered without extensive legal research. These are questions that would otherwise normally arise during a full franchise review process. This allows the franchisee to focus on 7-10 questions that are answered during a one-hour conference call.
- Estimated Sample Total Fixed Cost for Abbreviated Discussion Program No. 4 at Goldstein Law Firm, PLLC: $1000
- Estimated Sample Cost for Abbreviated Discussion Program No. 4 at Competitors’ Law Firms: $1000 – $2500
Call Goldstein Law Firm Today
In addition to the above, the Firm provides more detailed and complex services associated with a franchise review when requested by clients and warranted by the circumstances. For more information and a free initial consultation, please call (202) 293-3947 or contact us online today.