The Role of a Lawyer in Advising a Franchisee
As a result, it is important that franchisees obtain business, accounting and legal advice to enable them to assess the risks and benefits of the franchise offer.
Entry into a franchise agreement in an established network usually means that the franchisor is unlikely to want to make substantial changes to the franchise document. However, if you are one of the first franchisees into a network you can sometimes negotiate favourable amendments.
The key role of the franchisee’s lawyer is to advise a franchisee about legal issues associated with the franchise agreement and associated offer as well as to give advice in relation to commercial issues that ultimately involve a legal issue.
You should not sign the franchise agreement or any other document until you understand it in its entirety.
Some of the key legal issues that franchisees should look for are:
- Extent of the rights granted — is there any exclusivity?
- Fees, costs and expenses
- Term and options
- Who owns that intellectual property associated with the system? — It is usually not the franchisor
- Marketing rights and obligations
- The franchisor’s obligations
- Indemnities and limitations of liabilities in favour of the franchisor
- Restraints of trade
- What happens on termination of the franchise agreement during the term and upon expiry?
My recommendation, especially when obtaining advice in relation to an established franchise network is that if you want to limit your legal fees, do not to pay for comprehensive written advice or spend money trying to re-negotiate large parts of the arrangement. Instead the money should be spent on time with your legal advisor during which your lawyer explains the meaning of the contract and identifies key legal risks.
By Warren Scott, Partner - Mills Oakley Lawyers
24.09.2008
FCA Member
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