Hiring a Franchise Lawyer is an absolute must when it comes to new franchise agreements.

As your franchise application progresses, you will receive some of the franchise documentation. If you receive only a summary of the franchise agreement ask for a full copy. Also, have a your franchise lawyer review everything. No reasonable franchisor should refuse this request. A franchisor that won’t cooperate during franchise agreement phase should ring warning bells. If the franchisor resists a legal review or does not provide adequate documentation, walk away.
 
The franchisor should provide you with a copy of a Disclosure Document as well as the Franchise Agreement. The purpose of a disclosure document is to provide information on:
 
  • The sector the franchise operates in
  • Outline the history of the business of the franchisor
  • Who the directors and shareholder are
  • The business history of the franchisor’s directors
  • Key officers (including any previous history of business failure they may have been associated with)
  • The number of units granted, opened and the units that have closed or been terminated
  • Important costs including working capital needed to establish the franchise.
  • Profit and loss model based on the performance of current franchisees.
  • Intellectual property being licensed
 
You should engage a specialist franchise lawyer to help you in the process. They must have experience in both business and franchising. They should review the proposed agreement, disclosure document and all relevant documentation. There is no value in engaging a non-specialist to review the Franchise Agreement. Because such agreements are, by their nature, substantially different to ordinary business contracts. A specialist advisor is a must. It’s a worthwhile investment. More importantly, it saves you having to pay a lawyer to learn franchising at your expense.