Franchise Buyers Don’t Need a Lawyer – Yeah Right!
Okay, so I am biased. But it is a well-developed bias based on years of experience and shattered dreams. And years of hearing the same refrains: “I couldn’t afford a lawyer when I bought my franchise,” “I used the lawyer who drafted my will and he said the contract was fine,” and “I heard I would be wasting my money because the franchisor would not change the contract anyway.”
These excuses are usually first heard when I meet with a franchise owner who is now asking for advice regarding their dissatisfaction with their franchise relationship. Too late. That is, sometimes it is too late to help them.
The best time to seek the help of knowledgeable franchise counsel is when you are buying a franchise.
Here are the top 10 reasons why:
- Franchising is complicated.
- Unless you have a lot of experience buying franchises, you don’t know what to look for.
- If you cannot afford a qualified franchise attorney, you cannot afford the franchise.
- Lawyers who do not practice franchise law cannot effectively help you.
- Qualified franchise lawyers can educate you on the best way to search for a franchise and how to use their services.
- Qualified franchise lawyers start with an investigation of the franchise system and the Franchise Disclosure Document, not the franchise agreement.
- Good counsel can help you avoid selecting the wrong franchise.
- Knowledgeable franchise lawyers have resources and connections that you likely don’t.
- Proper negotiation of a development or franchise agreement is a matter of timing and nuance.
- The cost of a good franchise lawyer may not be more than 2-3% of your overall investment.
There are many other reasons, but you get the picture. Lawyers who practice regularly in the franchise arena (many of whom are members of the American Bar Association Forum on Franchising) can “read between the lines” of a Franchise Disclosure Document, know what is missing, and are able to detect a bad deal or even a scam.
The most effective use of a franchise lawyer may be taking pass on that franchise deal that could have resulted in the loss of your home, retirement fund and savings account, not to mention that loan from your mother.
Choose wisely but choose an experienced franchise lawyer first!
Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. He is also the author of How to Buy a Franchise. Visit www.ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or email@example.com.
Why I Have an Issue with the Forbes Franchise Rankings
The 5-Year Growth Rate and 5-Year Franchise Continuity are both great independent metrics of how a franchise is doing on average. As a potential franchisee both of these statistics are vital for selecting a franchise - you want to select a franchise that will provide you with a high return on investment and which will survive in the long run. I think these are, as FRANdata and Forbes suggested, two of the biggest (if not the two biggest) and most obvious metrics for whether or not a franchise is a “good” opportunity for a franchisee. But how do you use these to determine which franchise is BEST? This is the fundamental difficulty in coming up with a ranking system - it isn’t the difficulty in separating the good from the meh from the bad - it’s separating the great from the good and the best from the great. In the case of these rankings I found it to be pretty difficult to comprehend how they differentiated between the top ranked franchises. For instance, if you look at the difference between Discover Map (Forbes #4), Just Between Friends (Forbes #5), & Seniors Helping Seniors (Forbes #6) they all have extremely close continuity ratings and substantially different growth rates. In fact, in the case of these three, the overall rankings are opposite the growth rate rankings. Seniors Helping Seniors is ranked at the bottom of these three franchises despite having a growth rate that is 31 percentage points higher than Discovery Map and a continuity that is only 2 percentage points lower. This suggested to me that continuity was viewed as the dominant factor. But that logic didn’t hold for the rest on the “Economy Class” Top 10, as BrightStar Care (Forbes #7) had the same growth rate as Pop-a-Lock (Forbes #8) but a continuity rate that was 12 percentage points lower. These comparisons show that these were not the only two factors that went into the rankings, which is understandable, but no other factors that are explicitly listed in their results seem to be major factors.
FDD Compliance - What You Need to Know
The familiar UFOC is now obsolete. This webinar will educate you on the new terminology, new format, changes in delivery requirements, and the items in the disclosure document most changed by the new rule.
5 Tips for Finding the Right Franchise
So you’ve decided that a franchise is the right path for you? Now comes the exciting part—choosing among hundreds of franchise opportunities. Here are questions to ask yourself to help narrow the field: