This morning I spoke to a franchisee who spent hundreds of thousands of dollars buying a franchise and establishing its operations. The franchisee is currently experiencing losses and is extremely dissatisfied with the lack of support by the franchisor and issues involving encroachment and lost sales to corporate owned stores. Significantly‚ the franchisee did not review the franchise agreement prior to buying. When I asked the franchisee why‚ I received the following response:
Because the franchisor’s representative told me “you can get an attorney if you want but you would just be wasting your money because we will not make changes to the franchise agreement”.
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Lets think about this. First‚ many franchisors make this statement‚ yet‚ during the latter stages of the negotiation process‚ they do make changes. Second‚ and more importantly‚ a legal review of your franchise agreement and the franchisor’s FDD is a critical part of the “due diligence” process that you must take before you buy a franchise.
I know for a fact that many of the issues that I discussed with this franchisee would have been addressed in our FDD review. In fact‚ many of the issues that the franchisee mentioned are‚ more often than not‚ topics of conversation that I have with my franchisee clients.
So‚ before you buy a franchise‚ consider that every step of the due diligence process (including review by a franchise lawyer) is critical to equipping yourself with the necessary information to make the right decision.