Before you sign a franchise agreement-a contract that can lock you in as a franchise owner for up to 10 years, you need to hire a franchise attorney. And, that’s only one of 20 things you need to do before you buy a franchise. Now, before you say “I’ve heard that franchise agreements are non-negotiable documents” blah, blah, blah, check this out: Some parts of a franchise agreement actually are negotiable…sometimes. It depends on the franchisor.
Are Franchise Agreements Really Negotiable?
Some franchisors, especially young ones, will work with you on a couple of items. Maybe you can squeeze out a little more territory that what’s being offered. Maybe you can work in a “Right of first refusal” clause of some type-giving you the opportunity to purchase additional territory, or an additional location, if a potential new franchise owner is getting close to signing a franchise agreement with your franchisor. While some franchisors may frown on my suggestions-for whatever reason, it’s worth it to ask for some concessions. Better yet, it’s worth it for your franchise attorney to ask…or to teach you how to ask for things that a franchisor may be amenable to. After all, the franchisor wants to sell a franchise. And, you want to potentially buy one. Just don’t try this alone. Hire a franchise attorney.
The Top 5 Reasons To Hire A Franchise Attorney
If you’re not convinced that you should spend the money-and hire a franchise attorney, read what follows. Maybe you’ll change your mind.
1. You’re Not One That’s right; you’re not a franchise attorney. Not only are you not a franchise attorney, most likely, you’ve never done this before. You’ve never attempted to buy a franchise. Or, if you have, every franchise agreement is a little (or a lot) different. Buying a franchise is a big deal. Act like it is, and spend the money needed to do things right. Hire an expert…a specialist. Franchise attorneys are specialists in their field.
2. Protection You need to be protected. Your family needs some protection, too. Lawsuits are ugly. The only way to do it…in a legal sense-is to make sure that your interests are put front and center. Your interests need to come first. Period. Don’t look at this in any other way. Take your emotions out of the equation. This is a business transaction. Forget what can and can’t be negotiated for a moment. I encourage you to get ahead of yourself for a quick few seconds as you’re reading this. Imagine what would happen if you got sued by your franchisor. Do you feel it? The fear? Lawsuits happen. And, even though it’s a longshot that you’d get sued by your franchisor, for whatever reason, wouldn’t it be great if you could put a few things in place ahead of time to protect yourself if you did? A franchise attorney is paid to look out for your interests, not the interests of the franchisor. The franchisor has a franchise attorney at the ready to protect their interests. Need I say more?
3. FDD Review The Franchise Disclosure (FDD) can be over 100-200 pages in length. If you’ve been searching for franchises for a while, and have had contact with the franchise development departments of the franchises you’re interested in a couple of times, you’ve probably had an FDD sent your way. The FDD, a really long and really boring document, must be in your hands (by law) before you send a check to the franchisor. These days, most franchisors send their FDD’s via email. Sometimes, you’ll get access to it on a franchisors intranet via a special code. Either way, you will get one, and this is usually where the fun begins. Or the frustration. The FDD is written in a language few understand. Well, few except franchise attorneys that is. The FDD could be one of the most boring legal documents ever invented. But, there is a lot of critical information stuck inside of it. Some of it is easy to find…and easy to understand. But, there are other things in the FDD that are a bit confusing. That’s where a franchise attorney comes in. Today’s franchise attorneys have written FDD’s. They’ve also read a lot of different ones. They know what to look for. They can easily spot red flags. You may not be able to, and not because you’re not intelligent. It’s just that you haven’t read a lot of them before. You haven’t gone to law school, either! Why would you attempt to interpret an FDD on your own?
4. Franchisee Earnings Some franchisors disclose (in their FDD’s) what are called “Earnings Claims.” And, they’re really easy to read and understand. Here’s an earnings claim from 1-800-Sidewalk-Leveling*: We surveyed our franchisees (1,091) franchise owners operating 2,166 franchises) and received responses from 202 franchise owners who operate 445 franchise businesses. The average annual revenue per franchisee: $234,322 (68 of 202) franchisees, or 31 percent, exceeded this average) The average monthly revenue per franchisee: $20,858 (70 of 211 franchise owners, or 33%, exceeded this average) The average annual revenue per franchise: $111,184 (65 of 211 franchises, or 31%, exceeded this average) For more information, see Item 19 of our Franchise Disclosure Document. Your results are likely to be different from the results described above and, for a number of reasons, the results should not be considered as the actual or probable results that your 1-800-Sidewalk-Leveling* business will realize.” *1-800-Sidewalk-Levelling is a fictitious franchise business. (So far!) Did you understand what you just read? I didn’t-and I wrote the darn thing. Here’s what to do: Contact a lot of existing franchisees of the franchise concept you’re investigating, and talk to them about the earnings claims-if they’re disclosed, like they are above. Ask them if the figures seem accurate. Ask them how the figures should be interpreted. Then ask the franchise attorney you hired what they mean. In English.
5. To Sleep Better At Night The top reason to hire a franchise attorney is to sleep better at night. If you know in your heart-and in your head, that you’ve done everything humanly possible to lower your financial risk, you’ll be able to go into your new venture with confidence. Notice I didn’t say “total confidence.” You’ll still be nervous. You’ll still have that nagging fear that all of us have when we’re about to embark on something big. But, if you hired a franchise attorney…one who really knows his or her stuff, you really will sleep better.
The Bottom Line: Hire professionals that specialize in franchising. Look at it as an investment in your future. Don’t waste your time looking for free franchise legal advice. It’s not out there. Hire a franchise attorney before you sign your franchise agreement. Spend the money. Don’t be a cheapskate. Several franchise attorneys have made the wise choice of adding their contact information to the Franchise Biz Directory, so today’s future franchise owners-like you, can hire them to do what they do best. Franchise attorneys help future franchise owners lower their risk. Contact one today.