When Do You Need a Lawyer?

by Pamela Gold

All franchisees and serious prospective franchisees should have a qualified franchise lawyer on their team. This is a must. You will need a lawyer and an accountant who are both familiar and experienced with reading franchise contracts, understanding franchise relationships (especially the relationship between franchisees and franchisors), and handling situations that might arise when their client is a franchisee.

Why Pay for a Lawyer Before Closing?
Keep in mind, many franchisors are advised by a team of lawyers. Although hiring a lawyer to review and negotiate the initial contract and basic transactions may seem costly, it could actually save you money in the big picture. A lawyer will not only review and negotiate the most favorable terms for you: He can also identify potential problems before they happen! If you do not have a lawyer working for you before you close on a franchise, you might save on lawyer fees, but problems that could have been resolved before closing can become large, costly problems later. Often problems will never occur. Your franchisor is on your team and typically there aren't major legal issues that arise. With any large monetary venture, it is always in your best interest to have experts on board to ensure you are doing the right thing and getting the best deal.

"Everyone benefits, franchisors and franchisees, if everyone is well-educated and knows what they are getting involved in,"states franchise attorney Brian B. Schnell of Gray Plant Mooty in Minneapolis.

Laws Differ From State to State!
It's very important to have an attorney on your team who is familiar with your state's franchising laws. From advertisements (Proposed ads must be pre-approved by the franchisor in states like California, Maryland, and Illinois) to the regulation of termination and non-renewals of agreements (Many states have laws including Minnesota, Maryland, Arkansas, California, Iowa, and Illinois), laws vary widely from state to state and it is in your best interest to have someone on your team that is familiar with your state's rules, laws, and regulations.

Some of the Basics
An attorney can help a franchisee every step of the way, including:

• Evaluation of the franchisor, the opportunity, and the Uniform Franchise Offering Circular (UFOC).
• Review of the lease for a potential business location for a franchise.
• The potential negotiation of a franchise agreement prior to signing it. (Keep in mind that some franchises do not offer negotiation.)
• Guidance for franchisee associations and help with collective bargaining.
• Help and guidance in terminating a franchise agreement.
• Arbitration, litigation, and mediation assistance for franchisees.

More Reasons, If You're Not Already Convinced That You Need A Lawyer
The legal language of a franchise contract is not as easy to read as a brochure or an article about a company and its successes. You may be confused by terminology, or not fully understand what the contract is saying because of the way it is worded. A qualified franchise attorney can help you to understand the terms, and may also protect you from a mistake you might not be able to foresee on your own. Your lawyer can also advise you on the opportunity before you've signed papers, and can tell you if the opportunity is one that has the possibility of being lucrative with time. From the start, your franchise lawyer will review the franchise agreement and discuss with you the items that might be of concern to you.

"Each side is making a significant investment. You must have a meeting of the minds to agree on what you're getting into and what you're signing. A time-out should be called if you feel that there is a misunderstanding. If you were told one thing and then the contract says another, this should be negotiated. Your lawyer can sort through a situation like this," explains Schnell.

What To Look For in a Franchise Attorney
Your franchise attorney should have lots of experience in the franchise industry. Schnell adds, "Pick a lawyer who knows what they're doing. A lawyer who's not experienced in franchise law might ask the franchisor sixty questions regarding the contract, while an experienced franchise lawyer will know why some parts of the contract are stated as they are and what can be negotiated. Thus, they will ask the five critical questions that need to be asked."

Whether a lawyer only deals with franchisees, or also represents franchisors (in which case they might have more of an advantage because they have a balanced perspective on the industry), they should have a solid knowledge of the laws and regulations for franchising in your particular state. Franchise law is a specialty. Just as many doctors specialize in a particular field of medicine, lawyers may also specialize and you will get the most out of your time with your lawyer if he specializes in franchising. Experienced and specialized attorneys will know and understand why particular terms are in the agreement, and they will be able to point out when certain terms are not typical and should be questioned. Specialized lawyers will know where and when parts of the agreement can be negotiated.

Where Do You Go to Find a Qualified Franchise Attorney
A great place to start your search for a franchise attorney is by asking your personal lawyer for a recommendation. A franchise attorney may be as close as a partner in your lawyer's firm, or a professional colleague.

Bar associations are wonderful resources. Call your local bar association, or the American Bar Association for a reference. Also, go to the American Bar Association's web site at http://www.abanet.org/. Here, you can click on 'entities', and then 'forums'. You will find the Forum on Franchising, and you can purchase a directory of all lawyers that are members of this forum for $35. This member directory will give you a solid list of attorneys who specialize in franchising, organized in alphabetical and geographical order.

You will find that during your franchising journey, your franchise lawyer will be a priceless resource and a major asset to your business team. 

Pamela Gold is the Marketing Coordinator at Franchise Solutions Corp., based in Portsmouth, New Hampshire. Her primary responsibilities include the creation of original content on FS's web site, bi-weekly newsletter, and client ad pages.

Brian B. Schnell is an attorney at Gray Plant Mooty in Minneapolis, Minnesota. He specializes in franchise law, is co-Chair of Gray Plant Mooty's Franchise Practice Group, and represents many franchisors. You can visit Gray Plant Mooty at http://www.gpmlaw.com/.