When buying a franchise, there are lots of reasons to rely on professional legal advice. If you decide to move forward, you will be making a substantial long-term investment; and, while you will have control of your own destiny to an extent, your ability to succeed will depend heavily on your franchisor’s infrastructure, systems and support. A franchise attorney can help you make informed decisions, and your attorney can also help you avoid signing away rights that you can (and should) keep.
We’ve discussed reasons to hire a franchise attorney previously. In this article, we highlight the top five reasons not to sign a franchise agreement without legal representation:
1. Franchise Agreements Are Always One-Sided
All franchise agreements are heavily one-sided in favor of the franchisor. Franchisors have the upper hand, and they (and their attorneys) use this to their advantage. While a salesperson might tell you that the agreement is fair and you don’t need to worry about any surprises, the odds are that this salesperson isn’t actually familiar with all of the material terms and intricacies of the agreement.
2. Franchise Agreements Contain Several Pitfalls for Franchisees
Franchise agreements contain several pitfalls for franchisees (see our Top 10 Worst Provisions in a Franchise Agreement for some examples). When buying a franchise, you need to know the terms and conditions that apply—and you need to make sure you are prepared to deal with them for the duration of your franchise.
3. If You Don’t Know What You’re Signing, You Won’t Know When You’re In Breach
Breaching your franchise agreement is a serious matter—it can even put your franchise in jeopardy in some cases. If you don’t know what you’re signing, you won’t know when you’re in breach.
4. The Franchise Disclosure Document (FDD) Doesn’t Tell You Everything You Need to Know
Some prospective franchisees assume that they can review the FDD, and this will tell them everything they need to know about the franchise. But, this is not the case. While the FDD contains summaries of some of the information in the franchise agreement, it ignores several key provisions of the franchise agreement entirely. Additionally, FDDs are not always accurate; and, in the end, it is the franchise agreement—not the FDD—that governs the franchise relationship.
5. Good Franchisors Will Be Willing to Negotiate (At Least with Strong Prospects)
Finally, many franchisors will be willing to negotiate their franchise agreements. Franchisors know their franchise agreements are one-sided, and good franchisors will expect strong candidates to request reasonable modifications. By hiring an attorney to negotiate your franchise agreement on your behalf, you may be able to secure crucial protections that save your investment down the line.
Schedule a Free Initial Consultation with Franchise Attorney Jeffrey M. Goldstein
Franchise attorney Jeffrey M. Goldstein has more than 30 years of experience reviewing and negotiating franchise agreements on behalf of prospective franchisees. To inquire about our fixed-fee franchise business review services, please call 202-293-3947 or get in touch online today.
