Franchise opportunities

Using a franchise lawyer

By Peter McLaughlin, Redchip lawyers

In this article I look at the reasons for using a franchise lawyer. I often take calls from franchisees who have struck problems in their relationship with their franchisor or with the operation of their franchise business. It's common for these franchisees to have a complete misunderstanding of what is in their franchise agreement (or perhaps what is not in there that should be) or of how the agreement interacts with other agreements such as their shop lease. Those franchisees either chose not to obtain legal advice before signing, or obtained legal advice from a lawyer who was not experienced in franchising. Sadly, the price they pay for that choice does not become apparent until it is too late.

Buying a franchise or any other business is often one of the most significant purchases anybody will make - it ranks up there with buying the family home, but is far more complex. Your franchise business generates the income that supports you, your borrowings and your family. It is easy sometimes to try to save money by not getting proper advice -- but the risks can be significant. Spending money on professional advice must be regarded as part and parcel of investing in the franchise – it is no different to paying the franchise fee or buying a piece of equipment.

Here are some common misconceptions about obtaining specialised franchise legal advice:

1. It is a well-known franchisor so the agreement should be okay. The size or reputation of the franchisor really makes no difference to what is in the franchise agreement. It doesn't matter how many other franchisees signed -- what matters is that you understand what you are signing.

2. I read through the agreement myself and it looks straightforward to me. I find it is not always what is in the agreement that is important, but what is not in the agreement and how the agreement works in a practical sense. A clause in the agreement might look innocent enough but do you really understand what it means and how it is applied? This can be a lot different to what you think.

3. The franchisor has already told me it won't change the agreement, so what's the point. Whilst it's true that franchisors are often reluctant to change the agreement that is not universally the case. What is important is that you understand what you are signing -- it's the only way to make an informed decision about the investment you are making.

4. I will get my local lawyer to look at the agreement for me. That's fine if he or she is experienced in franchise law. They may be great at what they do but franchising is a unique area that requires experience and understanding of what should and shouldn't be in the agreement, what's reasonable and what's unreasonable.

The message is: franchisees should always consult an experienced franchise lawyer before committing to a franchise agreement. Choose wisely.
 

To contact Peter McLaughlin please email peterm@redchip.com.au

 

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