Accomplished California Lawyer Skilled in Representation of Franchisees
Business transaction services protect your interest in your new business
A franchise is an excellent way for self-motivated individuals to become their own boss. However, not all franchise opportunities are equal, and you must be diligent in your research of the parent company before putting any money down. That said, the difference between a mutually beneficial relationship with the parent company and a total nightmare for the franchisee often comes down to the fine print terms of the franchise contract. It’s incumbent on you to get trustworthy advice from a knowledgeable attorney who can evaluate your franchise agreement and alert you to potential pitfalls. At TransActionLaw, I draw on more than 30 years of business law experience to review franchise agreements and advise potential franchisees. I also continue to represent franchisees in their dealings with their parent companies to ensure fair and equitable treatment under the terms of their agreements.
Common issues that arise with franchise agreements
Consulting a business law attorney before you sign a franchise agreement is an absolute necessity. I explain all terms and conditions of the contract in plain language so you can fully understand the expectations of performance for both parties. Often, a full explanation of the give-and-take with the parent company leads a client to re-evaluate the decision to take on the franchise. In other cases, knowing the rights and responsibilities gives the franchisee the confidence to proceed. It also helps to know you have an attorney you can trust whenever contractual issues arise.
Issues that come up most often with franchisees I represent include:
- Misrepresentation or incomplete disclosure — If the franchisor’s agent has materially misrepresented facts about the parent company, especially its financial stability and its ability to fulfill promises of support, this can constitute fraud, which allows the franchisee to void the contract and walk away.
- Promises of support — The parent company is obligated to direct resources toward the franchisee, including training, advertising, supplies and other benefits. If after you pay your franchise fee, you see the flow of support dry up, I can help you enforce your rights under the contract.
- Royalty issues — Franchisees pay royalties to the franchisor based on either revenues or profits. Conflicts can arise when the parent company questions the accuracy of the franchisees’ calculation of royalties.
- Territory issues — When you purchase a franchise, you are joining a team and do not expect to compete against your teammates. If the parent company places additional franchises within your vicinity, you must act to protect your territory.
- Termination clause — A franchise agreement is a contract for a specified length of time. However, either side can terminate the agreement for various reasons, including breach of contract. Termination is rarely a mutual decision, so the jilted party often fights to enforce the contract. Generally, it is in everyone’s best interest to avoid litigation and negotiate a settlement.
- Transfer of franchise rights — Because there is risk of brand dilution if a franchisee performs at a substandard level, parent companies do not sell franchises to just anyone. There is a vetting process, which can be quite rigorous. Companies also put restrictions on a franchisee’s right to sell the franchise to another party. You must understand the limits of your rights before you agree to a contract.
A franchise agreement allows you to start up a business that already has name recognition and customer loyalty. But before you take on a long-term commitment, you must accurately assess your chances of success. A consultation with a knowledgeable franchise attorney is a necessary first step.
Contact TransActionLaw in Irvine for advice on franchise agreements.
To enhance your prospects of success as a franchisee, get advice and representation from a knowledgeable business attorney at TransActionLaw. To schedule a consultation, call 949-668-1385 or contact me online.