Franchise Attorney

There are two routes open to you in finding an attorney who specializes in franchised businesses. You can either get a referral from someone you know and trust, or contact the state bar association and ask for a list of attorneys who state specifically that they handle franchise business arrangements.

In other types of business ventures, you’re usually OK to go it alone and only need an attorney on an occasional basis. However, when you engage in a franchised business, both as the seller or the buyer, an attorney becomes an absolutely essential necessity since the entire nature of a franchise is a legally binding contract.

Probably the party at the greatest risk is the company that has just started up and is branching out into selling franchise contracts for the first time; there are all kinds of booby-traps to avoid here. If you do not maintain sufficient control over the business’ image, an incompetent or unethical franchisee can run reckless with it, spoiling your goodwill, hurting your marketability, or even getting you in trouble with the law. Similarly, should you fail to meet your end of the bargain, you can find yourself on the business end of a lawsuit served by the franchisee, whom is calling you out on some point that you thought would never come up.

One of the prickly concepts that franchise businesses tend to get mired in is “intellectual property”. Let’s examine a concept such as mixing food and entertainment, which has real-life applications in chain restaurants ranging from Chuck E. Cheese to Hooters. Say you started a restaurant chain, franchised it out, and one of the franchisees starts running a side-show with characters based on the mascots and trademarks of your business. Maybe you even like the idea and want to adopt it so that all the other restaurant chains do it. Now, whose intellectual property is this side-show? Who owes whom a royalty should the show be adapted for a television commercial? Questions just like this have come up in day-to-day cases involving franchises.

Here’s another case that’s going to be a tough call: the case of the business failure. Say you licensed out a franchise contract to several remote locations, and then one of them fails to make a profit. You discover that this is due to the sloppy practices of a franchisee. You can’t just fire this person; you have to call them out on their contractual obligation and replace them. So, what if they fight back in court, instead saying that the business failure was your fault? Squabbles over responsibility can drag out for years, and in some notable cases have been dragged all the way to the Supreme Court - most notably in disputes involving Burger King and Subway.

Things become even more complicated if your franchise business expands to more than one country. Now you have to deal with the vagaries of international law as well! What is illegal in one country may be permitted in another. Consider how many “knock-off brands” there are of established products. These knock-offs appear every day as substandard imitations of a higher-quality brand, and are typically produced in sweatshops in third-world countries. How are you going to protect your company should a knock-off product that imitates your brand start spreading?

This last point is of special concern should your franchise business involve a media-related product. Surely you’ve seen or heard of the international piracy of music, movies, and computer software that transpires daily.

If you are the franchisee, your need for legal counsel is just as great. You’ll need somebody who protects you from false claims, watches for problem areas in the contract, advocates for your fair treatment at the hands of the parent company, and protects you from unscrupulous business practices such as multi-level marketing schemes.

It is the large potential for abuse and damage that is an inherent part of franchising business that makes having a franchise attorney a necessity.