Choosing a profitable franchise When thinking...
Next to buying your home, purchasing a franchise may be the single biggest investment you will ever make. Despite the significance of such an investment, many prospective franchisees buy a franchise without the aid of a franchise lawyer. Just as you wouldn’t expect your family doctor to perform heart surgery, so you shouldn’t expect the lawyer who closed your house purchase to advise on the purchase of a franchise. Why not? Because franchising is a unique relationship and a specialized area of the law requiring specific expertise.
Certain provinces, including Ontario, have franchise-specific laws in place designed to protect prospective franchisees by requiring franchisors to provide disclosure documents. These laws set out the information that the disclosure documents must contain, as well as certain remedies available to you if the franchisor fails to provide a proper disclosure document. In addition, our courts are constantly changing franchise laws with new decisions coming out all the time.
Franchise lawyers deal with franchise laws daily and keep abreast of changes to the law as they occur. They review and even draft many disclosure documents, so they know what to look for and can more readily identify deficient disclosure. If a disclosure document is deficient, a franchise lawyer will be able to explain what this means for you, offer solutions, and advise you on potential remedies. Without such advice, you might buy a franchise without the information to which you were legally entitled—information that may have changed your mind about purchasing a particular franchise. Worse yet, you may be unaware of the remedies that may be available to you, such as the right to rescind (cancel) a franchise agreement within two years of signing it under certain circumstances.
The cornerstone of the franchise relationship is the franchise agreement, a complex legal document containing many elements unique to franchising. Franchise lawyers will not only recognize the nuances in franchise agreements but will also know what provisions to focus on. They can more readily ascertain variations from common features found in many franchise agreements. Further, they are more likely to have experience with the specific franchise industry that you are investing in and identify provisions in the franchise agreement that vary or are outside industry norms.
Also, there is a common perception that franchise agreements are non-negotiable. This is not the case: often, you can (and in some cases should) negotiate changes to the franchise agreement. Trying to negotiate changes after the franchise agreement is signed is next to impossible. A franchise lawyer will usually have more success in negotiating changes to the franchise agreement before you sign it, knowing the types of changes that are more likely to be acceptable to the franchisor.
Successful franchise relationships often last for 20 years or more. During this time, things will change—sometimes for the worse. Many of the issues that you will encounter are complicated and often unique to franchising. The franchisor may not provide the support it promised, sell its goods through different channels in direct competition with your business, change its policies or practices, treat you unfairly, or modify its franchise system altogether. Whatever the circumstance, having an existing relationship with a franchise lawyer who is familiar with your business and who is experienced in dealing with such matters may be the difference between timely, expedient resolution of the issue and failure of your business. The franchisor will certainly have an experienced franchise lawyer on its side from the beginning; shouldn’t you?
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