Jeffrey M. Goldstein, founder of the Goldstein Law Firm, has been practicing franchise law for more than 30 years. Exclusively representing franchisees and dealers, he has successfully represented clients across the country in franchise agreement negotiations, arbitration, litigation and other franchise-related legal matters. Here, he sits down for a Q&A session to discuss some of the biggest legal risks facing new and existing franchisees:
Q: What are some of the most-important legal factors to consider when buying or operating a franchise?
In addition to facing the same legal risks as all business owners, franchisees face a number of additional risks as well. These risks relate predominantly to the rights granted to the franchisor under the franchise agreement. From operating standards to franchise transfer and renewal, franchisors have a say in virtually all aspects of franchisees’ businesses, and they will not hesitate to intervene (or even terminate a franchisee) when they believe that doing so is in the best interests of the franchise system as a whole.
Q: How can prospective franchisees protect themselves before signing a franchise agreement?
As a prospective franchisee, there are two primary ways to protect yourself before you sign a franchise agreement: (i) conducting thorough due diligence, and (ii) negotiating the terms of your franchise. By gathering as much information as you can from as many sources as possible, you can gain confidence in your decision to move forward (or to pursue a different path). Once you decide to pursue a particular franchise opportunity, then negotiating the terms of the franchise agreement is a critical final step before you sign on the dotted line.
Q: How can existing franchisees protect themselves if they are having issues with their franchisor?
If you are currently having issues with your franchisor, it is important that you seek legal advice promptly. Franchisors typically reserve various remedies for themselves in the event of franchisor-franchisee disputes, and you need to try to protect yourself before you are forced to confront a wrongful termination.
Q: How often do disputes between franchisors and franchisees end up in litigation?
These days, many franchise agreements include mandatory ADR provisions, and disputes between franchisors and franchisees will often end up in mediation or arbitration rather than litigation. However, even when a franchisee has waived its right to seek legal and equitable remedies in court, disputes will often be resolved informally without the need to institute mandatory ADR. Of course, this is not always the case, and franchise agreements typically include carve-out provisions that allow the franchisor (and only the franchisor) to pursue litigation when necessary.
Q: When should I consider speaking with a franchise attorney?
If you are thinking about buying a franchise, you should absolutely discuss the opportunity with a franchise attorney before you buy. Our firm offers several different fixed-fee franchise review programs for prospective franchisees. Likewise, if you are facing a dispute with your franchisor, you should speak with an attorney as soon as possible. You need to have a clear understanding of your options; and, if legal action is necessary, acting promptly could be critical to protecting your legal rights.
Schedule a Free Initial Consultation with Franchise Attorney Jeffrey M. Goldstein
If you have more questions and would like to speak with Mr. Goldstein in confidence, you can contact the Goldstein Law Firm for a free initial consultation. To schedule an appointment at your convenience, please call 202-293-3947 or inquire online today.
