Hiring Competent and Experienced Franchising Lawyers is Essential
Franchising lawyers and legal issues relating to your franchise
Hiring competent and experienced franchising attorneys is essential, and puts you into the mindset of thinking like a businessperson as you review, negotiate, and sign a wide range of legal documents, contracts, and agreements.
Establishing a business, especially a franchise-based business, is a huge undertaking and one that has a wide range of legal implications. In order to become a franchisee, you’ll first need to undergo a series of interviews with the franchisor. As the franchisor is evaluating your ability to operate a business, as well as your personal and professional background and your finances, you’ll have the opportunity to learn about the franchisor by reading the Uniform Franchise Offering Circular (UFOC) that’s provided. If you decide to move forward and become a franchisee, you’ll be required to sign a Franchise Agreement, which is a legal agreement between you and your franchisor that establishes, describes, and enforces the relationship. You will want your franchising lawyers to review these documents.
It’s essential that you understand that by becoming a franchisee, there is no legal partnership between you and your franchisor. You are technically an independent business owner and operator. Although the relationship may be described to you as a marriage or a partnership, in the sense that you’re both working toward the same goals, legally, you are not partners. The Franchise Agreement you’ll be signing outlines the actual legal and business relationship you’ll have with your franchisor. It’s absolutely vital that you understand the true nature of this relationship. Be sure to have your franchising lawyers explain this all to you.
Why you need franchising lawyers
A franchise attorney is a lawyer who has an expertise in franchising. Franchising lawyers will understand the legal nuances of a UFOC and Franchise Agreement and truly understand how franchising works. This area of expertise is very different from that of a general business attorney or another type of lawyer, which is why hiring a franchise attorney for this process, is so important. The nature of the relationship between a franchisor and franchisee is unlike other types of traditional business relationships, including partnerships. Thus the documents used to solidify this relationship are vastly different from those with which most general business attorneys are accustomed to dealing.
The concept behind a franchise system is that every franchise unit follows exactly the same cookie-cutter approach to operating the business. From a franchisor’s standpoint, every franchisee needs to adhere to the same set of rules, guidelines, and contracts. Thus, while you’ll be provided with a UFOC and Franchise Agreement, both of which are legal documents, as a potential franchisee, you will not be able to negotiate the terms of either of these essential documents.
These two documents often contain a significant amount of legal talk and technical information pertaining to the specific franchise opportunity. Both documents outline the obligations of the franchisor and franchisee. The purpose of hiring and working with a qualified franchise attorney (who represents your interests) is to help you fully understand each and every line contained within these documents.
For the purpose of reviewing these two documents, your attorney is not being hired to negotiate or modify them. If your attorney indicates items in these agreements that are not favorable to you (as a franchisee), before signing them, you have the option to walk away from the opportunity. As soon as you sign these agreements, you’re fully obligated to all of the terms described within them, for the entire length of the agreements (which will probably be anywhere from ten to twenty or more years).
Aside from the UFOC and Franchise Agreement, there will be a handful of other contracts you’ll want and need your franchise attorney to review, help you negotiate, and potentially modify before these documents are signed. Depending on the type of business you’ll be operating, the lease you’ll probably be signing with your new landlord is an example of a contract that can be negotiated and altered by you and your attorney (assuming the landlord agrees to the modifications).
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