More people are dreaming of franchising, ready for a life change as the market is once again heating up.
But before you take the plunge, make sure your due diligence includes working with a franchise attorney, someone who knows franchising inside and out.
We strongly agree with a SmallBizTrends.com post we spied, “The Importance of Hiring A Franchise Attorney,” by Joel Libava who writes, “If I had $100 for every time I’ve told a client or entire audience to ‘only use a franchise attorney,’ I’d be a very wealthy man.” Most, as you would expect, listen to Libava’s suggestion. “But, sometimes they don’t, and it’s a problem.”
Just as we happily share our vast point of sale experience and expertise with startup owners in order to help them make the best decisions from the very beginning, we at Sintel Systems are happy to share articles and commentary about the perceptions and reality of the risks involved in making this career change.
“Use franchise professionals whenever possible during the franchise purchase process,” Libava writes. “You’ll breathe easier knowing you did everything you could to mitigate your risk.” Here are reasons why Libava believes it is important to only use a franchise attorney when you’re buying a franchise:
First, franchise attorneys have taken the time to learn all the intricacies of franchising and franchise law. “Most franchise attorneys today didn’t set out to become franchise specialists [and] they weren’t really exposed to franchising in law school,” Libava writes. “As a matter of fact, some of them probably started out as corporate attorneys.”
In the post, Libava shares what Leslie D. Curran, a partner at the well-known franchise law firm of Plave Koch PLC, wrote about the subject on the American Bar Association website: “Before addressing laws and regulations that are unique to franchising, franchise attorneys often find themselves advising companies on corporate and trademark issues. For example, a company considering franchising may wish to form a new entity to offer franchises and must decide what type of entity to form, how to organize it, and what organizational documents are necessary. Because franchisees buying into a system will want the unrestricted right to use the name and mark used by the system, a franchise attorney will work with the franchisor to obtain federal registration of a trademark.”
Second, because franchise attorneys read and write franchise contracts all the time, they know exactly what to hone in on. In addition, Libava knows franchise attorneys keep up with all of the latest franchise laws, which can vary from state to state.
Certain states, known as “Regulation States,” even have separate rules and regulations. In alphabetical order, they are California, Florida, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington and Wisconsin. Libava notes the list is essentially the states with the most comprehensive regulation of franchises, according to the attorneys at Kern & Hillman, LLC.
Third, Libava knows that attorneys specializing in franchising know the Franchise Disclosure Document (FDD) like the back of their hands. All prospective franchise owners receive the FDD well before they actually purchase the franchise.
By law, the FDD contains 23 specific items about the franchisor, including the identity and business experience of key persons, litigation history, franchisees estimated initial investment, restriction on sources of products and services, obligation of the franchisee, and obligations of the franchisor.
Libava also knows that the importance of hiring a franchise attorney goes well beyond their understanding of the documents you’ll be required to sign once you’ve reached your decision. “Hiring a franchise attorney is important because, when it comes down to it, their real job is to protect you,” Libava writes. “It’s one thing for them to explain the legal documents in franchising. It’s quite another to advise you. A good franchise attorney will offer his or opinion on the feasibility of your potential new venture.”
Franchise attorneys have seen their clients succeed, and they’ve also seen their clients fail. “Having a trusted advisor in your corner can greatly improve your chances for success as the owner of a franchise business,” Libava concludes. “A good franchise attorney can be that trusted advisor — and more.”
Read the full SmallBizTrends.com post here.
For more insights into the franchise-seeking mindset, check out our related posts, As Second Career Franchisers, Baby Boomers Are In The Zone, The Five Points Of A Franchise Star, A Veteran, A Franchise Player, Franchising Happiness, Finding A More Perfect Union, and Before Investing, Interview Franchisees.
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