Qualified Franchise Attorney:
Don't Buy a Franchise Without One

by Patricia Schaefer

What defines a qualified franchise attorney?

Good indicators of a qualified franchise attorney include:

• Specializes in franchise law.
• Years of franchise industry experience.
• Has a solid knowledge of your particular state's franchising rules, laws and regulations (Laws vary widely from state to state, governing franchise activities such as advertisements, termination and non-renewal of agreements. It is essential to have an attorney who is familiar with your state's franchising laws).
• Active member of the American Bar Association Forum on Franchising, and/or;
• Member of the International Franchise Association's Supplier Forum.

Also take care that the attorney you select is not an agent of your prospective franchisor.

Who needs a qualified franchise attorney?

Franchisors know the value of a good franchise attorney; in fact, it is not unusual for a franchisor to be counseled by a team of experienced lawyers. Every serious prospective franchisee and every established franchisee should have expert legal counsel on their franchise team.

Why do you need a qualified franchise attorney?

Experienced and specialized franchise attorneys will advise and help prospective franchisees understand legal issues and documents, and protect them from costly mistakes. Two key franchise documents requiring legal assistance are the franchise disclosure document, usually in the form of the Uniform Franchise Offering Circular (UFOC), and the franchise agreement. Documents such as these are not as easy for the layperson to read and understand as the many other papers received from and about the prospective franchisor.

Franchising is also subject to a number of complex and specialized laws. This, coupled with the active and involved relationships that exist in a franchise system, requires the assistance of a qualified lawyer. Counsel will provide prospective franchisees with the know-how to make realistic and sound franchise decisions.

A qualified attorney will also assist in the thorough investigation of the prospective franchisor, its reputation, business record and industry. The increasing success of franchising has brought along with it a number of fraudulent franchise promoters. Your expert attorney can help prevent you from being involved in any franchise schemes, scams or swindles.

When do you need a qualified franchise attorney?

The time you first need a franchise attorney is when you are serious about investing in a franchise opportunity; while you are still in the research process, but preferably at the end of the process. Try to save the expensive parts of your franchise research till the end -- like traveling to the franchise company headquarters or in fact seeking legal counsel -- so if you lose interest, your expenditures will be minimized.

When you're certain you've found your franchise of choice, find yourself a qualified franchise attorney to provide the aforementioned pre-agreement legal services before you sign on the dotted line. Find out from the franchise salesperson if there are any terms or provisions in their franchise agreement that are negotiable; and if so, which ones. Some franchisors are resolute that they will not make any changes to their agreement. Informing your attorney of these facts beforehand will save your attorney time and save you needless legal fees.

You will also require the services of your franchise attorney from time to time throughout the ownership of your franchise, in matters such as contract renewal or resolution of any potential disputes with the franchisor.

How can a qualified franchise attorney assist you?

Michael Einbinder, a partner in Einbinder & Dunn, has a nationwide practice in franchise law, and represents franchisors and franchisees in business transactions and litigation. Practicing law since 1981 -- and a member of many franchise associations including the American Bar Association Forum on Franchising -- Einbinder shares with Franchise Trade the services his firm provides to prospective and established franchisees:

When we represent prospective franchisees, we provide the following services:

• Review of the Uniform Franchise Offering Circular (UFOC) and all agreements.
• Preparation of a detailed analysis of these documents.
• Negotiation with franchisor of changes in the agreements.
• Formation of business entity to operate the franchise.
• Preparation of shareholder or operating agreements
• Negotiation of leases for business operation.

When we represent franchisees after they acquire the franchise, we provide the following services:

• Assistance in dispute resolution with the franchisor (claims involving breach of contract, fraud in connection with the franchise sale, post termination non-competes, and encroachment issues).
• Review of renewal agreements (these agreements change considerable from the agreement signed by the franchisee when he or she enters into the agreement).
• Formation of franchisee associations to negotiate issues affecting the franchise system as a whole.
• Transactions involving the sale of franchised businesses.

Where can you find a qualified franchise attorney?

• Ask your personal or business attorney, or accountant, for a referral.
• If you know someone personally who has invested in a franchise, get a referral.
• Ask franchisees in your area for a referral, as well as franchisees in the system you're investigating. It may behoove you to have an attorney who is already familiar with a particular franchisor.
• Your local or American Bar Association.
• International Franchise Association.

Copyright 2006, Attard Communications Inc.