Q Why does a prospective franchisee need to work with a franchise lawyer?
Franchise lawyers do not have any special designations or certifications, but by working primarily with clients in the franchising sector, they are well-attuned to the nuances of interpreting franchise law and the industry standards that will affect you as a franchisee. They can tell you if royalty rates are too high or if obligations put on the franchisee are too burdensome.
Most franchise lawyers will start by reviewing the disclosure document, franchisee agreement and all related documents provided by the franchisor, drawing attention to areas of concern, unreasonable clauses and other items you should be aware of before you sign.
Franchisees should take advantage of this legal review and negotiate with franchisors themselves before involving lawyers in seeking the best terms possible from the franchisors and their counsel. Franchise lawyers can also assist with incorporation, shareholder agreements, lease reviews and other needs as you move toward becoming a franchisee.
Q Where should I go to find a franchise lawyer?
You can gain valuable information about franchise lawyers online, but it should not be the only place you look. It is important to understand the difference between a lawyer whose name comes up first in your search results and one who actually practises in the relevant area of law. Dig deeper to see who has consistently written and/or spoken about franchise law.
You should ask other franchisees, whom you can find listed in the disclosure document. Contacting them may result in recommendations of legal counsel that was of assistance to them in the past. You may also receive warnings about lawyers to avoid!
Q What other factors determine which lawyer or firm I should work with?
Trust can be gauged by meeting in person and developing a rapport. Be sure the lawyer you retain understands not only the nature of the franchise business, but also your own goals and objectives. If your lawyer seems more concerned with negotiating minor or technical points of the franchise agreement, he/she may not have your particular needs in mind, but is instead running through a standard and unfocused review.
Make sure you communicate your budget for legal fees upfront. Try to get your lawyer to name a flat fee, rather than billing by the hour. An expert will know what is involved in reviewing a franchise agreement and delivering a comprehensive report. If your lawyer seems skittish about committing to a flat fee, it is probably a bad sign of large, unpredictable fees to come.
Be sure to understand the range of services in the quote. Do they include followup meetings, phone calls and e-mails? What types of disbursements (e.g. printing, copying, legal searches and long-distance calls) can you expect to be charged for? Can fees be predicted for future negotiations with the franchisor?
Most lawyers are good people with a genuine interest in helping their clients succeed in business.
Chad Finkelstein is a partner at Dale & Lessmann LLP in Toronto. For more information, contact him at (416) 369-7883 or via e-mail at firstname.lastname@example.org.