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Purchasing a Franchise

Purchasing a franchise is an exciting time! However, it can become a nightmare. Failure to properly consider all information can lead to financial devastation.

WARNING: A Franchise Consulting Company Is Not the Same as A Franchise Attorney.

Most franchise consulting companies only make money by selling franchises. They typically do not highlight the risks or obligations, only the potential rewards. We explain all the pros and cons so that you can make a truly educated decision.

We are an experienced franchise law firm. We can assist those who are considering the purchase of a franchise. As part of our service, we analyze all documents from the franchisor along with the financial condition and reputation of the franchisor. We assist our clients in setting realistic goals and expectations rather than relying on the sales pitch of the franchisor or franchise consultants. Our goal is to assist the client in fully evaluating the risks and opportunities surrounding the franchise.

Do not gamble with your financial future. A franchise is a long-term commitment. A long-term commitment that requires you to continue to pay the franchisor fees even if you are losing money. It is crucial that you understand every word in your franchisor disclosure document and your franchise agreement. In addition to doing research on the franchise itself (including case history research), we read every word in the franchisor’s documents. After a thorough review of everything we consult with you and explain our findings. After a franchise consultation with us, you will be able to make a fully informed decision on whether or not you are ready for the risk and commitment a franchise requires.

Did you know that if you fail, you still owe the franchisor additional fees? For example, if you sign a ten-year franchise agreement and you run out of money three years in, you will owe the franchisor liquidated damages of seven years.

Did you know that the franchisor requires you to sign that you are not relying on the sales pitch you received? In other words, we told you about all the stuff we are going to do for you but it doesn’t matter. We will only provide what is in the contract.

Did you know the contract is written to benefit the franchisor? It is crucial that you understand that the franchisor’s legal counsel wrote the contract to the benefit of the franchisor, NOT the franchisee. Almost the entire franchise agreement, including the services they provide franchisees, is at the discretion of the franchisor. In other words, franchisees are at the mercy of the franchisor.

We provide you with:

  • Detailed review of the franchisor disclosure document

    • As we review the document we mark up the document with comments, warnings, and suggestions.

  • Detailed review of the franchise agreement

    • As we review the document we mark up the document with comments, warnings, and suggestions.

  • Review of the financial information including the financial history

    • The franchisor will only give you the two years of financial history. We are often able to access additional years of financial history in order to do a proper review of the franchisor’s financial health.

  • Review of the franchise’s growth (or decline)

    • The franchisor will give you a list of the franchisees in the system and those who left the system usually only in the last year (sometimes two). We are often able to access additional years of franchise history in order to do a proper review of the franchisor’s system strength.

  • Background check on franchisor

    • This includes a litigation history review, contacting current & former franchisees, and a detailed internet search

  • Advice based on our extensive experience with franchises

    • We use our extensive knowledge and experience related to representing franchisees, to provide you with advice, suggestions, and warnings so that you can make a truly educated decision.

We cannot stress to you enough the importance of hiring an experience franchise attorney to provide a detailed review of your franchisor’s documents before you purchase a franchise.

Our Cost: In an effort to make these reviews reasonable (and affordable) for all, we charge 10% of the franchisor’s initial franchise fee.

Current/Former Cases & Investigations & Consultations:

  • Contours Express

  • AAMCO

  • Curves

  • The Janitorial Agency (TJA)

  • Stratus

  • Bonus Building Care

  • Dickey’s Barbecue Pit

  • Instant Tax Service

  • Liberty Tax

  • Tutor Doctor

  • Mathnasium

  • Window World

  • Images 4 Kids

  • Complete Nutrition

  • Pinots Palette

  • Sauce on the Side

  • SkinBe

  • Blo Blow Dry Bar

  • Comfort Dental

  • Oil & Vinegar

  • Anytime Fitness

  • Griswold Home Care

What is a Franchise?

A franchise is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system. Franchises are commonly marketed as a “business in a box” or “be in business for yourself not by yourself.”

Franchising is about the franchisor’s brand value (its most valuable asset), the support the franchisor provides to its franchisees, and the franchisees obligations to deliver the product or services to the system’s brand standards. It is a delicate relationship.

A great franchisor will provide systems, tools, and support so that their franchisees have the ability to successfully deliver the brand’s standards and ensure customer satisfaction. A great franchisor knows that the franchisee is the local face of the company. The franchisor provides the franchisee with franchising leadership and support and exercises some controls to ensure the franchisee’s adherence to brand guidelines. While the franchisee is responsible for the day-to-day management of its independently owned business and benefits from his own performance and capabilities.

In the United States, a franchise is a specific type of licensing arrangement defined by the Federal Trade Commission and also by several states. In the United States a franchise generally exists when:

  • The franchisor licenses a franchisee the right to use its trade or service mark;

  • To identify the franchisee’s business in marketing a product or service using the franchisor’s operating methods;

  • The franchisor provides the franchisee with support and exercises certain controls; and,

  • The franchisee pays the franchisor a fee.

However, the definition of a franchise is not uniform in every state. In fact, the definition can vary greatly under the laws in some states and, as such, it is important to know each particular state’s requirements.

While investing in a franchise can be a great opportunity, before you select any franchise investment or sign any franchise agreement, do your homework! You must thoroughly understand what the particular franchise system is offering and contact a qualified franchise lawyer.