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Franchise Why do You Need a Lawyer

Why do you need a Franchise Lawyer?

A franchise lawyer will need to review all the documents – usually in the form of a Disclosure Document, Franchise Agreement, Licence or Lease and Sale of Business.

These documents will need to be compared against the Franchising Code, to ensure that complete disclosure is provided. If you are buying an existing business, you may want to restrain the current franchisee from competing in a similar business in your area (this will be on top of any agreements between the franchisor and current franchisee).

It is important to use an accredited franchise lawyer/solicitor that practices regularly in the franchise law area, as it critical that your franchise lawyer negotiates on your behalf and ensures that the documents comply against the Franchise Code. It is a specialist area and the law is always changing and evolving, particularly around disclosure. Often franchisors or brokers offer a law firm as a recommendation. We suggest that to gain true independence, an “affiliated” law firm with the franchisor may not always have your interest at heart as ultimately the referral has come from the franchisor.

You will need to use an accountant to review the Profit and Loss statements and carry out a due diligence program on your behalf. The types of things you will need to understand is how do you get customers, who are your top 10 customers, review tax returns, how many hours do you need to work, how much administration is involved, what are the true profits of the business and so on. You may also need advice on the appropriate business structure and may need to set up companies, trusts and licences.

Finally, a business advisor can provide you with information around key risks and help you to develop a business plan to grow the business.

A business plan should include, at the very least:
• Definition and Scope of the Business;
• Charter (goals and objectives);
• Market research;
• Marketing Plan;
• Financial Plan (1, 3 and 5 year projections – including assumptions, best case / worst case scenarios);
• SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats);
• Legal Plan – review and analysis of documents;
• Insurance Plan;
• Staffing Plan;
• Action Plan;

If you are seeking funding, your bank or financial institution will require a comprehensive business plan as part of your application. Franchise law can be extremely complex and it’s advisable that you seek advice from an experienced Franchise solicitor.

Read more about Franchising:

  1. What is Franchising? The Pros and Cons
  2. Doing Your Homework
  3. Why do you need a Lawyer?
  4. Franchising Agreements & The Code
  5. Breaches, Termination and Disputes
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