Vinson Franchise Law Firm provides legal services to franchisees of all sizes, ranging from prospective new franchisees about to sign their first franchise agreements, to existing franchisees, multi-unit developers, area representatives or master franchisees. We assist franchisees with their legal rights and obligations under franchise agreements and other agreements that affect their businesses.
We provide legal services to franchisees by:
reviewing and commenting on the proposed franchise agreement
negotiating changes with the franchisor
dealing with franchise transfers, terminations, non-renewal, and other franchise law issues
Services for Existing Franchisees
Existing franchisees occasionaly need the services of an experienced franchise lawyer such as Vinson Franchise Law Firm when:
they desire to transfer the franchise to a third-party
they desire to sell the franchise back to the franchisor
they desire to purchase an additional franchise from another franchisee
they have received 2 or more notices of default under the franchise agreement
they have received a notice of intent to terminate the franchise agreement
We help protect the franchisee's rights and interests in these situations.
Services for Prospective Franchisees
The franchise agreement is a serious commitment.
It represents the framework for a legal and business relationship between a franchisor and franchisee.
It often requires the payment of a substantial up-front fee, which is usually not refundable.
It is intended to last for many years.
It usually cannot be easily terminated by the franchisee.
It may impose liquidated damages or other types of "penalties" if the franchisee tries to terminate it.
It is very important for you to fully understand the franchise agreement BEFORE signing it. Vinson Franchise Law Firm can assist you with this.
Additionally, a newer or smaller franchisor may be willing to negotiate with a prospective franchisee – and we can help with this too.
FAQs for Prospective Franchisees
1. What should we do before buying a franchise?
Make sure franchising is right for you
Research the franchise you are considering
Compare competing franchises
Consult an experienced franchise lawyer
Get all important promises from the franchisor in writing
2. What should we do to make sure franchising is right for us?
First, learn all you can about franchising, and the characteristics of successful franchisees. Then, honestly evaluate your own personal strengths and weaknesses to see how they match up with the requirements for franchising.
3. How can we research the franchise we are considering?
There are a number of sources for information on the franchisor and the franchise offering.
a. FDD. Contact the franchisor and request a copy of its franchise disclosure document, commonly called an "FDD." Study the FDD, the proposed franchise agreement (included in the FDD) and any other proposed contracts included in the FDD. Make sure you understand everything. An experienced franchise lawyer can help you with this.
b. Current Franchisees. The FDD should include a list of current franchisees. Contact as many as you can, and ask them all about the franchise. Arrange to spend some time at a franchised unit to get a feel for the day-to-day operations of the business.
c. Former Franchisees. The FDD should also include a list of franchisees who left the system within the last year. Contact these former franchisees and find out about their experiences.
d. State Franchise Regulators. If you are in a state with franchise registration requirements, the state franchise regulators can tell you whether the franchisor is in good standing in that state. They may also be able to tell you whether there are any pending complaints against the franchisor.
e. Franchise Brokers. If you are using a franchise broker, they can also help you research franchisors. But, keep in mind that most franchise brokers work for the franchisors (and not for you) -- so they tend to be biased.
f. SEC. If the francisor is a publicly-traded company, it is required to file certain information with the U.S. Securities and Exchange Commission. These filings are available online at www.edgar.gov.
g. Internet. The Internet can be a gold mine for people searching for information about buying a franchise. But, always be sure to consider the source. Some web sites make money by selling listings to franchisors.
4. What are franchise brokers?
Franchise brokers are the franchise world’s equivalent of real estate agents. They help match franchisors (sellers of franchises) with qualified franchisee prospects (buyers of franchises). They work for the franchisors, and are paid by the franchisors. They have relationships with certain franchisors, so they will attempt to steer you to one of their franchisor clients.
5. How can we compare competing franchise systems?
Find out who the competing franchise systems are, and get basic information about the competitors. If some of these competitors look interesting, contact them to request a copy of their FDD. Then, compare the important information about the competing systems to see which looks like the best value for the investment. Overview information allowing a comparison of many franchise systems is available at Entrepreneur magazine's online Franchise Zone.
6. Where else can we get a company's FDD?
There are two primary sources for free, on-line copies of FDD:
7. How can we find out how much we can make with different franchises?
A franchisor is not required to provide prospective franchisees with financial information about actual or potential sales, costs, income or profits of the franchised business. If the franchisor chooses to provide this kind of information, the information must be stated in full in Item 19 of the FDD. This information (called a "financial performance representation") must include a description of the factual basis for the information, and a description of all material assumptions. If the FDD for the franchise you are considering includes an earnings claim, make sure you study and understand all of the footnotes to the financial information.
If the FDD does not include earnings information, there are 2 primary sources for financial information:
• Current and former franchisees; and • A book entitled "How Much Can I Make?", which includes financial performance representations for about 100 different franchises in about 30 different industries. (US$29.95) Click here for the Amazon.com description of the book.
8. What other kinds of agreements are commonly involved in franchising?
Every franchise involves a franchise agreement (sometimes called a "license agreement"). Your franchisor may also require you to sign additional contracts, such as: a confidentiality agreement, a non-competition agreement, a software license agreement, a power of attorney, an assignment of telephone numbers, and other contracts. Sometimes, these kinds of provisions are all included in the franchise agreement itself
If you set up an entity (like a limited liability company or a corporation) to serve as the franchisee, the franchisor will usually require the owners of the entity to sign confidentiality and non-competition agreements. The owners of the franchisee entity may also have to personally guarantee the franchisee’s performance of the franchise agreement.
9. Why do we need to get all important promises in writing?
The franchise agreement probably contains a provision (called a merger clause) that says that only the terms of the written contract are binding, and that any verbal promises or representations are not binding. If a franchisor makes a verbal promise to you that is not in the franchise agreement, and that promise is a major factor in your decision to buy a franchise, then you need to get the promise in writing (preferably, as an addendum to the franchise agreement) or else the promise will probably not be enforceable.
Service Packages for Prospective Franchisees
At Vinson Franchise Law Firm, we are sensitive to the financial pressures on start-up businesses. So, we offer several different levels of review and advice -- depending on your needs. We can do as much or as little as you would like us to.
The time involved in each level of review generally increases the further down the list you go. To minimize attorney’s fees, we provide our comments and advice by legible, handwritten comments in the margins of the documents. If requested, we can prepare a written report, but this usually involves several hours of additional time on our part, and is not included in any of the fee estimates below.
1. Question-Based Review
This level of service is appropriate if you have a very good understanding of the FDD and franchise agreement, but you have specific questions that you would like answered by a franchise lawyer. Under this level of review, we review only those parts of the FDD and franchise agreement needed in order to respond to your specific questions.
Fee estimate: US$500 to US$1,000. Required initial payment: US$500.
2. Red-Flag Review
This level of service is appropriate if you have a fairly good understanding of the FDD and franchise agreement, but you would like the documents reviewed by a franchise lawyer for “red flags” -- unusual or missing disclosures in the FDD, and contract provisions in the franchise agreement that are unfair or unusual or unclear. Under this level of review, we review the complete FDD and franchise agreement to look for red-flags, but we would not normally point out the fairly-standard onerous and one-sided provisions that commonly appear in franchise documents. This is the most popular level of service we offer for prospective franchisees.
Fee estimate: US$1,500 (for most franchise systems, we can do this level of review for a flat fee of US$1,500 – rather than at our normal hourly rate -- if the franchisor's documents are in good shape). Required initial payment: US$1,500.
3. Education-Based Review
This level of service is appropriate if you have very little understanding of the franchise documents and legal relationship between franchisor and franchisee, and would like a franchise lawyer to explain it all to you. Under this level of review, we review the complete FDD and franchise agreement, and point out any red flags plus the fairly-standard onerous and one-sided provisions that commonly appear in franchise documents.
Fee estimate: US$2,100 to US$2,700. Required initial payment: US$2,100.
In addition to document review, we can also get involved in attempting to negotiate changes to the franchise agreement and drafting proposed language. However, many franchisors (especially established franchisors) decline to negotiate the franchise agreement, and instead offer the franchise on a take-it-or-leave-it basis.
We have reviewed franchise documents for many different franchisees, and would be glad to provide client references upon request.
Other Resources for Franchisees and Prospective Franchisees
Licensed in California, Nevada and Texas. Not certified as to any specialty by any state bars.
This web site provides general information only. Laws differ from state to state, and they change over time. Nothing included in this web site should be construed as creating an attorney-client relationship, or as the provision of legal advice.
Links to other web sites are provided for your convenience and information. They are not intended to be endorsements. Third-party trademarks and service marks used in this web site belong to their respective owners.
All contents copyright 2002-2017 Robert E. Vinson, Jr. All rights reserved. The information contained in this web site may not be reproduced, downloaded, disseminated, published or transferred in any form or by any means, other than downloading for personal use, except with prior written consent of Robert E. Vinson, Jr.