Do you need to take independent legal advice on your franchise investment?

Posted on 14th June 2016 at 4:10pm by Carl Reader in Business

Perhaps the most commonly asked question that I have from prospective franchisees, with regards to the legal agreement, is whether they have to obtain independent legal advice. My answer is always “absolutely” – and then I usually enter into a long discussion about why you should use a solicitor that understands franchising, rather than a general commercial or family solicitor. In my opinion, there are two main reasons to use an expert:

  1. Cost: surprisingly, using an expert often ends up far cheaper than using a general practitioner. The reason for this is that most solicitors want to show value for their fees, and hence create a long list of potential issues and areas for negotiation. Realistically, as a franchisee you will not be able to get a franchisor to amend their terms, and it is also intended to be in the franchisors favour in many areas! Therefore this negotiation becomes a waste of your money, and might lead you to not take on an agreement that is actually pretty normal for a franchise agreement. Franchise specialist advisors understand this, and hence look to protect you in respect of clauses that might be out of the ordinary when compared to other franchise agreements.

  2. Industry knowledge: an advisor who is established in franchising will be aware of who’s who in the industry, the concepts that are successful, and ultimately will be able to advise you practically in respect of both the agreement and what to expect when you take on the franchise. This experience is invaluable, and simply not available from the vast majority of high street firms.

Now that we know why an expert should be used, it is worthwhile stepping back and understanding the general need for advice. Simply put, the agreement is a major commitment, which ties you in for a number of years and will require major financial input. Failing to perform simple checks on what you are purchasing can lead you to make a very expensive mistake – certainly, I’d hope most wouldn’t purchase a house without a survey…

The above is an extract from The Franchising Handbook, which is due for release imminently. Follow this link to pre-order and be one of the first to read it!

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