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I Want to Buy a Franchise, Do I Need to Hire a Lawyer?

(Great, a lawyer answering a question about whether you need to hire a lawyer)

Answer? Yes - but not right away.

The competent advice and guidance of a franchise lawyer will serve as a valuable tool (one of the many "tools" that are required) to be utilized on your road to entrepreneurship and the purchase of a franchise. The advice provided by your franchise lawyer should be based on practical experience and involve a detailed review of the proposed franchise agreement and franchise disclosure document (FDD) and be followed by negotiations with the franchisor. However, while hiring a franchise lawyer is critical, it should not be your first step.

So what do I mean by "not right away"? The process of buying a business is not a "sprint" (at least it should not be) but rather an "endurance event" that will require you to seriously evaluate your individual needs, business skills and expectations. Once you have made this assessment, you will be faced with the challenging task of finding a business that is both profitable and right for who you are and your skill sets. This is no easy task and will require that you do significant research (tons of resources available on the web), communicate with other business owners, communicate with existing franchisees and, possibly, seek out the advice of franchise professionals.

Don't just pick or get stuck on one particular franchise model or limit your research to the information provided to you by the franchisor's salesperson. Remember, first and foremost, what matters most to a successful franchise investment are "profits" that will be measured by your ability to take home money to your family each and every month. So question everything. If the franchise sells soup, then question how you will earn "profits" in the summer. If the franchise sells ice cream, understand how "profits" are generated in the winter. If the franchise appears to draw long lines or generate large revenues, then question what percentage of those long lines and revenues are converted into "profits".

Once you have completed your own internal analysis and "business review" , thats when the legal advice and analysis becomes critical. The franchise agreement that you will sign will serve as the blueprint and road map for your business for many years to come. As such, there are many, many critical issues that you must address with your franchise lawyer. Some of the many issues that you must discuss and evaluate, include:

  • The franchise fee that will be charged
  • The continuing royalty that you will be paying on a monthly or weekly basis
  • Advertising fund fees that you may or may not be required to contribute to
  • Approved vendors and suppliers of the supplies and products critical to your business
  • The protected territory that you may or may not be granted
  • Buildout and lease obligations that you will be required to undertake
  • Many, many other issues.

In many instances, (contrary to statements by a franchise sales person that their franchise agreement is "non-negotiable") your franchise lawyer will be able to negotiate and implement modifications to your franchise agreement that will have a substantive impact on your franchise investment and increase the odds for your success. In today's economic climate, my experience has been that franchisor's are more willing than ever to negotiate with new franchisees. Even things like deferring "royalties" for a number of months.

Learn more about buying a franchise by calling (800) 976-4904.

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