When Buying a Franchise, Do you Need to Hire a Lawyer?

(Great, a lawyer answering a question about the necessity of hiring a lawyer?)

Short Answer? Yes- but not right away.

The advice and guidance of a franchise and business lawyer will serve as a valuable resource (one of the many "resources" that will be required) on your road to entrepreneurship. This advice should be based on practical franchise and business experience and must involve a detailed review of the franchise agreement and franchise disclosure document (FDD), followed by negotiations with the franchisor. However, while hiring a franchise lawyer is critical, it should not be your first step - as a prospective franchisee there are many things that you should be doing before hiring a lawyer.

So what do I mean by "not right away"? Buying a business or franchise is a serious matter that will require "you" to spend time evaluating your personal needs, skills and financial expectations. Once you have made this "personal assessment" (i.e. whether or not entrepreneurship is right for you), you will be faced with the challenging task of finding a business that is both profitable and compatible with who you are (including the needs of your family) and the skills that you bring to the table. This is not a simple task and it will require that you ask questions, conduct significant research (there are tons of resources available on the web), communicate with existing franchisees and, possibly, seek out the advice of franchise professionals.

Don't just pick or get stuck on one particular business or franchise model or limit your research to the information provided to you by the individuals trying to sell you a business. Always keep in mind that the success of a franchise or business investment will be measured not by "gross revenue" or "how busy the store appears to be", but rather by your ability to generate "profits" - tangible "profits" measured by your ability to take home money to your family each and every month.

So, before you even get to the stage of speaking with an attorney make sure that the business that your are evaluating (a) is compatible with your skills, (b) is consistent with the lifestyle that you have designed for yourself and your family, and (c) is based upon a business model capable of generating tangible "profits" to support your lifestyle and family. Remember, in many cases the most "popular" franchises are not the most "profitable". Once you have completed your own internal analysis, that is when the advice of a franchise and business lawyer becomes critical. The franchise agreement that you will be asked to sign will serve as the blueprint and road map for your business for many, many years to come. Contained within the franchise agreement will be critical issues that you must discuss and review with your attorney - Some of issues, include:

- The royalties (based on a percentage of your "gross" sales) that you may or may not be required to pay;

- The "protected territory" that you may or may not be granted;

- The non-refundable franchise fee that you will be charged;

- Restrictions on vendors who you may or may not deal with;

- Lease obligations;

- Overall start-up costs; and

- Many, many other issues.

In many cases, (contrary to popular belief) your franchise lawyer may be able to negotiate the terms of your franchise agreement and obtain modifications that will have a substantive impact on your franchise investment and your overall success. Leave no stone unturned and question everything.

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