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Top Reasons to Consult an Attorney Before Signing a Franchise Agreement
There are many reasons to seek competent legal assistance when purchasing a franchise. You will be making a significant long-term investment—and while you will have a certain level of control over your own destiny, your ability to succeed will be somewhat reliant on the infrastructure, systems, and support provided by your franchisor. A franchise attorney can assist you in making informed judgments and in avoiding signing away rights that you should preserve. Below are five reasons not to sign a franchise agreement without consulting an experienced attorney to guide you through the process:
1. Franchise Agreements are Drafted in Favor of the Franchisor
All franchise agreements are highly skewed in the franchisor’s favor. Franchisors are in the position of power, which they (and their lawyers) take advantage of. Throughout the sales process, you may be told that the agreement is fair and that there will no surprises; however, many franchise salespeople are not familiar with every element and nuance of the franchise agreement’s terms.
2. The Franchise Disclosure Document (FDD) Does Not Provide All Relevant Information
Some potential franchisees believe that reading the FDD will provide them with all of the necessary information about the business. This, however, is not the case. While the FDD offers summaries of some of the details in the franchise agreement, it completely disregards several crucial elements. FDDs are not always 100% accurate—and most importantly, the franchise relationship is governed by the franchise agreement, not the FDD.
3. There are Many Pitfalls Applicable to Franchisees in Franchise Agreements
Certain provisions of franchise agreements pose various risks to franchisees. When considering the purchase of a franchise, you must be aware of the terms and circumstances that apply—and ensure that you are prepared to cope with them throughout the life of your franchise. Consulting with an experienced franchise attorney can help you navigate these potential pitfalls.
4. If You Don’t Fully Understand the Ins-and-Outs of the Franchise Agreement’s Provisions, You Won’t Know If or When You’re in Breach
Breaching your franchise agreement is a serious problem that, in some situations, might put your franchise at risk. Even minor breaches of the agreement can create massive headaches for your business—both from an operational and financial perspective. If you do not fully understand the ins-and-outs of the many provisions of your franchise agreement, you may not realize if or when you’re in violation of its terms. Enlisting a knowledgeable franchise attorney to serve as your guide can help you avoid potential breaches and maximize your franchise’s chance of success.
5. Many Franchisors are Willing to Work Out a Deal
In some cases, franchisors will be open to rework certain provisions of their franchise agreements (at least with potential franchisees they deem to be serious/strong prospects). Franchisors understand that their franchise agreements are one-sided, and effective franchisors will usually anticipate serious prospects requesting certain changes. You may be able to secure important protections for your franchise investment by employing an experienced attorney to negotiate the franchise agreement on your behalf.
Schedule a Free Consultation With The Castle Law Firm
If you are considering purchasing a franchise within the Chicagoland area or the State of Illinois, The Castle Law Firm is here to help you understand your rights and obligations under your franchise agreement—and to make suggestions and/or negotiate with the franchisor on your behalf. Attorney Rob Castle has extensive experience assisting franchisees throughout the State of Illinois in setting up and operating their franchise units, and helping his clients achieve their long-term business goals. Call us at (312) 889-8702 to schedule a free consultation or email the firm today.