Do I Need to Get Legal Advice on a Franchise Agreement?

Signing a franchise agreement is a big decision. It’s a legally binding document with long-term implications for your business and financial future. You might wonder if you need a franchise lawyer to help you. Let’s break it down.

Legal Requirements

The Franchising Code of Conduct doesn’t require franchisees to get legal advice. If you decide not to, you’ll need to sign a certificate. This certificate confirms that the franchisor advised you to get legal, but you chose not to. By signing that certificate, you’re acknowledging you’ve made the decision independently. However, skipping legal advice can leave you exposed. A franchise lawyer can help you avoid surprises by ensuring you fully understand the agreement before signing.

Franchisor Requirements

Some franchisors take a firmer stance on legal advice, and make it a requirement. For larger investments, for example, they may require you to get advice as part of their process. They want to ensure you’ve understood the agreement and are entering it willingly and informed. These franchisors often won’t execute the agreement until you provide a legal advice certificate. For them, it’s about protecting their brand and ensuring a smooth relationship from the start. A franchise lawyer can sign this certificate while also ensuring your interests are protected.

Why Legal Advice is Important

Franchise agreements can be long and full of legal jargon. A franchise lawyer will break it down for you. They’ll explain the important clauses in plain language, so you understand exactly what you’re agreeing to. They’ll also identify any harsh, illegal, or unfair terms. For example, the agreement might include clauses about personal guarantees, restrictions on selling your business, or penalties for breaching minor terms. A franchise lawyer can point these out and help you negotiate better terms. Then there’s the disclosure document. This document outlines key information about the franchise, including costs, fees, and obligations. While it might look straightforward, it can have traps. A franchise lawyer will scrutinize it to ensure you’re fully informed.

Financial Analysis Matters Too

Understanding the financial aspects of the franchise is critical. While this is typically the job of an accountant, your lawyer can work with your accountant to ensure nothing is missed. Together, they can analyze fees, royalties, and any hidden costs in the agreement or disclosure document. This teamwork ensures you have a clear picture of your financial commitments before you sign.

Consequences of Skipping Legal Advice

Choosing not to get legal advice can be risky. You might sign an agreement you don’t fully understand. This could mean agreeing to terms that don’t match the deal you thought you negotiated. For example, the agreement might include overly harsh clauses, like the ability to lodge a caveat on the family home. These could be security provisions that allow the franchisor to seize your assets if you breach the agreement, or restrictive exit clauses that make it hard to sell your business. Without advice, you’re left to navigate these risks alone. That could lead to unexpected costs or disputes later on. A franchise lawyer helps you avoid these pitfalls and ensures the agreement reflects what was promised.

Final Thoughts

Getting legal advice before signing a franchise agreement is more than a recommendation—it’s a smart investment in your future. A franchise lawyer will ensure you’re fully informed, protect your interests, and help you make the right decision. If you’re looking for a franchise lawyer who understands the complexities of franchise law and takes the time to get to know your business, we’d love to help. Don’t leave your future to chance—get the advice you need to succeed.

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply