A lawyer can seem like an unnecessary expense when buying a franchise with so many other costs to consider.
Remember that buying a business is one of the biggest decisions you’ll make in your life. Legal advice should be considered as an investment. Like any investment, there are a number of key ways to secure a good return.
Here are some benefits to working with a franchise lawyer…
1. Franchise expertise and experience
Find a lawyer experienced in franchising who handles franchise-related issues on a daily basis. A specialist will know what to look for, identify red flags and point you towards what you should be looking at. They’ll also help you with the best way to structure your business.
At minimum, your lawyer should review your draft franchise agreement, disclosure document, lease and anything else you’ve been asked to sign before you sign anything. If you’ve already signed your franchise agreement, then your ability to negotiate changes will be limited. You’ll also be left with a costly problem if you have a change of mind and decide to not proceed, for instance if you cannot secure finance.
Franchise agreements are drafted by lawyers essentially so that only other lawyers can understand them. Your lawyer will be able to explain the key provisions in easy-to-understand terms and the reasons behind them. Understanding these reasons and the flow-on consequences is vital to ensure that you and the franchisor are both on the same page when it comes to your obligations.
2. Franchise agreement negotiation
Every franchise agreement and contract is up for negotiation. Your lawyer will identify the clauses in the franchise agreement which may not be in your favour and can assist with negotiating a more balanced agreement, but keep in mind that franchisors are generally hesitant to amend their documents unless you have good reasons.
Your lawyer will also ensure that any promises made to you by the franchisor are recorded properly in the franchise agreement or ancillary agreement such as a prior representations deed. You should be fully transparent with what you tell your lawyer.
Engaging a lawyer to review your documents before you sign can save you money in the long-term.
Knowing your legal rights from the outset will help you avoid breaching the franchise agreement, and will put you on notice about things you may not have considered or realised will affect your profit margin.
3. Compliance with the Franchising Code of Conduct
A specialist will advise you on your rights and obligations under the Code and the law in general. There are strict timeframes and other requirements under the Code governing franchises.
Your lawyer can help you avoid landing in hot water with the franchisor or the Australian Competition and Consumer Commission.
4. Answers to your questions
Ensure your lawyer knows exactly what your expected scope of work is. They’ll tell you what is and isn’t included in their costs quote.
Come prepared. Read every document the franchisor has given you and every document you expect your lawyer to read. As you do this, highlight and make a list of questions about things you’d like clarified and covered off when you meet with your lawyer.
Don’t dismiss these questions as “silly” – raising queries (however small) with a lawyer is often a prompt for your lawyer to dig deeper and ensure that your best interests are being protected.
Taking the time to do this in the beginning will avoid a last-minute rush to sign your documents. Important things can be missed when you rush.
5. Your business partner
Finally, think of your lawyer as a business partner, not just someone who you’ll have a one-off meeting with. They’ll be happy to take your call and have a chat about anything which may arise during the course of your franchise.
Whether you’re expanding, selling your business or involved in a dispute, a lawyer who knows your situation and history will be a valuable asset.
By Luke McKavanagh and Peter Rouse, Rouse Lawyers