What Does a Franchise Lawyer Do, and Why Do You Need One?
The franchising industry is becoming quite popular in the entrepreneurial world. It’s an excellent way for entrepreneurs to start a business using a company’s existing positive reputation and successful business model.
Likewise, it’s a good way for established brands to expand their reach and become even more popular.
For the most part, it’s a win-win situation, but only if both parties (franchisors and franchisees) reach an agreement. This is where a franchise lawyer comes in. Legal matters are complex, and only an experienced team can walk you through them.
Anyone who’s starting a franchise will need legal help. Here, you’ll find out what these specialized lawyers do and how they can help you in your franchising journey.
- A franchise lawyer provides services to franchised companies and buyers. They help licensors and buyers make informed decisions when signing an agreement.
- Some of their duties include offering counsel to clients, ensuring both sides follow laws and agreements, knowing state and federal franchise laws, representing franchisors and franchisees in court hearings, and preparing franchise agreements.
- When selecting legal representation, check that they are licensed, specialize in franchising, and have specific expertise in corporate and/or business law.
- The Federal Franchise Rule, which is monitored by the Federal Trade Commission (FTC), is the standard for governing franchises.
- This law states that before any franchise agreement is signed, the franchisor must provide the potential franchisee with a Franchise Disclosure Document (FDD), which an attorney should review.
- What Is a Franchise Lawyer?
- What’s a Franchise, and How Does It Work?
- What Do Franchise Lawyers Do?
- Why Do You Need a Franchise Lawyer?
- What Is Franchise Law?
- How to Choose a Good Franchise Lawyer
- Frequently Asked Questions
- Protect Yourself and Your Business
What Is a Franchise Lawyer?
A franchise lawyer, also known as a franchise attorney, provides legal services to franchised companies and buyers. They help licensors and buyers make informed decisions when signing an agreement.
A franchise attorney will have attended law school where they studied various related topics like corporate law, business law, corporate accountability, corporate taxation, corporate finance, and more. They will need to pass the bar before getting licensed and taking on their first case.
This specialized law school training allows them to expertly help clients navigate the complex world of franchising by drafting documents, handling legal issues, and understanding the regulations, rules, and laws.
What’s a Franchise, and How Does It Work?
It’s a business owned and operated by a person, usually called the franchisee, but overseen and branded by a larger company. This company is usually national or multinational, and this is called the franchisor.
Once you sign an agreement to open your own franchise location, you will use their trusted business model with proven products, prices, and marketing techniques.
You also have unlimited access to the company’s slogans, signage, logos, and other things related to the franchise business.
What Do Franchise Lawyers Do?
Naturally, franchise lawyers must understand the specific associated laws before giving legal counsel.
These attorneys help clients deal with franchising companies, and anyone interested in franchising needs one. However, an attorney’s role may change based on who they represent.
Here are some of the duties they perform:
- Offer legal counsel to clients
- Ensure both sides follow laws and agreements
- Know state and federal laws
- Represent franchisors and franchisees in court hearings
- Prepare agreements
- Stay up to date on new rules and policies that might affect the business
- Represent clients in case of dispute resolutions
- Advise clients of risks attached to the business
Overall, their job is to keep you in line with the laws and regulations associated with franchising. Also, they can help prevent any legal mistakes that might cause you problems in the future.
Why Do You Need a Franchise Lawyer?
If you’re starting a franchise or looking to buy into one, you won’t want general counsel. Here’s why you’ll want to find someone with franchising training instead.
- They’re specialists: These specific attorneys know corporate law and everything that concerns a franchisee-franchisor relationship.
- Reading and writing contracts: A franchise attorney knows what to look for in franchise documents and contracts. They’ll read through each document to ensure they meet franchising laws and regulations. They will also draft the franchising agreement for the business.
- Protect your interests: An attorney provides legal advice so you can make informed decisions. They’ll also let you know the advantages and disadvantages of franchising and what you can do to succeed as a franchise owner.
As a warning, beware of franchisors who tell you that you don’t need legal help. That’s a red flag, which makes it all the more important for you to get an attorney. No one should pressure you to sign an agreement without having an attorney look through the details.
What Is Franchise Law?
The Federal Franchise Rule, which is monitored by the Federal Trade Commission (FTC), is the standard for governing franchises. This law states that before any franchise agreement is signed, the franchisor must provide the potential franchisee with a Franchise Disclosure Document (FDD).
This document contains vital information, including the duties of both parties, fees, the franchisor’s financial statements, and more details pertaining to the relationship between the two parties.
Although every franchisor must comply with the law, states have the ability to modify it. Furthermore, each state has its own franchising laws that differ from the federal regulation.
Every franchise company must know what’s expected of them by the state. This can include your tax and financial obligations, personal liabilities, etc.
How to Choose a Good Franchise Lawyer
There are many franchise attorneys, so you can use these factors to determine which of them is right for you:
1. Look Into Their Experience Level
The most important way to vet an attorney is through their experience level. An experienced franchise lawyer will have worked with other franchises in the past, making them familiar with the field.
You can start by asking prospects if they’re experienced with franchise law, if they belong to any associations, what honors or awards they’ve received, and if they have any testimonials.
2. Ask About Fees
Generally, franchise lawyers charge an hourly rate that can be anything from hundreds to thousands of dollars. If, as a potential franchisee, all you need help with is some quick legal guidance, then you should look for attorneys who charge a predetermined flat fee.
They should be upfront about what their services will cost, and it doesn’t hurt to get quotes from a few reputable lawyers to compare.
3. Ask Questions
An experienced franchise attorney should be able to answer all of your questions, including if they have experience with litigation, arbitration, mediation, your specific industry, and more. Some may offer a free consultation, so inquire about this as well.
Frequently Asked Questions
Who Needs a Franchise Lawyer?
Anyone who buys or sells franchises needs a specialized legal team. Franchising is complicated, so having an attorney helps keep everything streamlined and legal.
The following people need to employ the services of a franchising attorney:
– Anyone looking into a franchising model
– Established franchisors
– Franchisees about to purchase their first franchise business
– Franchisees who plan to expand their business
– Anyone engaging in franchise-related businesses
How Much Does a Franchise Lawyer Cost?
Franchise lawyers can charge an hourly fee between $150 to $500, although some can charge as much as $1,000 per hour. However, this cost usually depends on many factors. Some can stick to a flat rate, too.
How Can I Hire the Right Franchise Lawyer?
You can find experienced franchise attorneys through any of the following means:
– Current Franchisees: You can reach out to franchisees for a referral.
– IFA: You can also get attorney partners through the International Franchise Association (IFA). Go through their website to find franchise-oriented legal aids. Note that every law firm on the site has paid for an IFA membership.
– Bar Association, SBA, and Chamber of Commerce: Checking in with your local Small Business Association (SBA), as well as the Bar Association and Chamber of Commerce, is another good way to find reliable legal help.
Protect Yourself and Your Business
Overall, hiring the services of a franchise lawyer is a worthy investment. With them, you can run your business on the best possible terms and conditions and with less risk.
Still, before making your selection, do your research to ensure you hire an experienced and reputable legal team to represent you.