7 Key Questions to Ask a Lawyer When Buying a Franchise

Investing in a franchise opportunity can be a great way to start your own business under an established brand. By purchasing a franchise, you will gain access to the franchisor’s brand and systems and their training and support provisions. Although this can be exciting, you must approach the process carefully. You must conduct your own due diligence to ensure the opportunity will be a sound investment. Part of your due diligence can involve consulting a lawyer. A lawyer with franchising knowledge will be able to review the documents the franchisor has provided you and help you make an informed decision. This article will explain several crucial questions you should ask a lawyer before you invest in a franchise opportunity. 

1. What Are the Terms of the Franchise Agreement? 

A lawyer will be able to give you an overview of the terms of the franchise agreement. They can also help you understand those terms’ potential implications and clarify legal jargon.

You should read through the franchise agreement yourself first. This crucial step in your due diligence process can help you spot any inconsistencies or points you might ask a lawyer or the franchisor for clarity. When reading through, note these points so you remember to mention them. Doing this can also help you to prioritise what to discuss with a lawyer, as their time can be costly. 

2. Are There Any Territorial Restrictions? 

The franchisor will stipulate whether there are any restrictions on where you can operate within the franchise agreement. They will also include exclusive territory rights, the right to be the only franchisee operating in a particular area within the franchise agreement. Not every franchise agreement will have territorial restrictions or rights, but these might be essential to your decision to invest in that franchise opportunity. You can ask a lawyer for clarity on these rights or restrictions. 

For example, suppose the opportunity involves a mobile car repair business, but other franchisees within that brand already operate in a similar area. In that case, you might ask the franchisor for exclusive territory rights. It is in the best interests of your franchise business model to have an exclusive area to operate within that other franchisees cannot access. 

3. Are the Training and Support Provisions Sufficient? 

The franchisor’s training and support provisions can make or break a franchise opportunity. Their support can prime you to run a successful business under their brand. You will want to ensure the franchisor’s training and support provisions will prepare and help you run a successful business. You might ask a lawyer whether the franchisor provides sufficient support. 

4. What are the Renewal Conditions? 

A lawyer can highlight the conditions for renewing the franchise agreement after the initial term expires, including potential fees or changes in terms. These are especially important as they pertain to the continuation of your business. 

5. What Are the Exit Strategies and Termination Conditions?

Asking a lawyer about the potential s.exit strategies the agreement enables can allow you to plan your long-term strategy. You might ask about the conditions under which you can exit the franchise agreement and whether there are penalties. 

6. Are There Any Hidden Costs? 

You can ask a lawyer whether they notice any potential hidden costs you might not have spotted despite a thorough read of the franchise agreement. These include costs which are not immediately apparent, such as advertising fees or equipment upgrade costs. 

7. Can You Also Review the Franchise Operations Manual? 

In addition to reading the franchise agreement, it can be a good idea to ask a lawyer to review other documents the franchisor has given you. These include the franchise operations manual. This document can also provide further information on your roles and responsibilities as a franchisee. 

Key Takeaways 

Seeking legal advice forms part of your due diligence as a prospective franchisee. By asking a lawyer vital questions about the franchise opportunity, you can protect your investment and lay the foundation for a successful business venture. Your questions might cover aspects of the opportunity, such as: 

• the terms of the franchise agreement;
• training provisions;
• costs; and
• the contents of the franchise operations manual. 

Moreover, if you want to modify the franchise agreement, a lawyer can also negotiate with the franchisor. 

You should also carefully read the franchise agreement and operations manual to determine whether the opportunity is a sound investment. It is crucial to do your own research alongside consulting a lawyer. You should inquire into aspects such as:

• the franchisor’s background; 
• the franchised brand’s history; and
• financial aspects. 

If you are a prospective franchisee who would like legal advice about a franchise opportunity, LegalVision’s experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.