9 Factors to Consider When Choosing a Franchise Attorney

9 Factors to Consider When Choosing a Franchise Attorney
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In Franchise Your Business, author and franchise consultant Mark Siebert delivers the ultimate how-to guide to employing one of the greatest growth strategies ever -- franchising. Siebert shares decades of experience, insights, and practical advice to help grow your business exponentially through franchising while avoiding the pitfalls. In this edited excerpt, Siebert offers his advice on choosing the best franchise attorney for your needs.

Creating the legal documents required to franchise isn't something left to the amateurs. Franchise law is very specialized and, considering the patchwork quilt of laws across the U.S., highly complex. So you'll want to hire an attorney who specializes in franchising.

But make sure you find your consultant first. The reason is simple: Your consultant, if they're good, will not only tell you how to franchise but will also tell you if franchising is the right expansion strategy for you. Hiring a franchise attorney before settling on this strategy is a waste of time and money. Moreover, finalizing your business decisions prior to engaging counsel will serve to make your lawyer’s time more efficient -- thereby reducing your legal costs. In fact, many attorneys will reduce their fee based on the fact that you've retained a consultant.

By contracting with an experienced franchise law firm from the start, you:

  • Avoid conflicts of interest
  • Enjoy attorney-client privilege
  • Avoid having to pay for legal documents twice (once for their cre­ation and once for their review by outside legal counsel)
  • Can use a law firm for legal proceedings (such as franchise closings, transfers, negotiations, etc.)
  • Know the firm that developed your legal documents is properly insured in the highly unlikely event of a problem

Regardless of what you decide, be sure the individual lawyer you'll be working with (not the firm) has the level of experience you need to ensure your documents are bulletproof.

So how do you go about finding the right attorney? Unfortunately, with the hundreds of thousands of franchises that have been sold in the U.S. in the past decade, many attorneys who aren't franchise specialists can claim to have worked on franchise documents. While they may be able to throw around the names of top franchise companies, their experience may be limited to reviewing an FDD or working with a franchisee on a nonfranchise-related issue. So while an attorney may represent themselves as having franchise expertise, in fact, their experience may fall far short of what you really need.

So how do you make your choice? The best way is to receive one or more referrals from franchise professionals. Should you choose to handle the search yourself, the first and most important factor is experience. Check the attorney’s website to see if “franchise law” is listed as a separate practice area. Then look at the lawyers in their franchise practice group. Do their bios talk only about franchising, or do they list other areas of expertise, such as general contract law, real estate, estate planning, etc., as a part of their practice? Do they list franchise publications? Do they list franchise-specific honors (being named to the Franchise Times list of Legal Eagles, for example)? How long have they been practicing franchise law?

Again, it's the experience of the individual franchise attorneys you need to be concerned with -- not the firm’s reputation. So be sure you check their credentials.

Once you've identified the attorneys you'd like to consider, ask them probing questions based on what's important to you as a prospective franchisor. Below are some areas you need to consider:

Franchisor vs. franchisee experience. Your franchise lawyer needs to have experience on the franchisor side of the equation. If a franchise attorney does the majority of their work for franchisees, they may be too pro-franchisee with their advice. In addition, if they do all their work on the franchisee side and don't regularly draft FDDs (a question you should ask anyone you're interviewing), they're unqualified.

Transactional vs. litigation focus. A transactional attorney will focus their practice on preparing your franchise legal documents. If your franchise lawyer doesn't have some focus on the transactional side, they won't be as efficient at preparing your documents. The advan­tages of working with a franchise attorney who also has a litigation practice are that they can represent you, if needed, in a lawsuit, and they may be more focused on preventing litigation in the drafting process. The disadvantages, of course, are that they're not as specialized, and during a trial, they may be almost impossible to reach (if one person does both).

Flat fee vs. hourly. Since FDDs are fairly predictable, many franchise attorneys on the transactional side will work on a flat-fee basis, as they have enough experience to know how much time the average startup franchise program will take. The advantages to working with a flat-fee franchise lawyer are that their fees are predictable and can often be financed over a few months. The disadvantage is you might occasionally (rarely, in our experience) pay more than you would if you were charged an hourly rate. Most transactional attorneys are looking for a long-term relationship, so they'll often discount their initial fees to establish the relationship.

What’s included? If you're working with a flat-fee attorney, make sure you know what is included in the flat fee and what isn't. Otherwise, you're likely to compare apples to oranges. Does the fee include any franchise registrations? If so, how many? If not, what are the costs per registration? Does the fee include a review of your franchise operations manual or your franchise marketing material? If they're an hourly billing attorney, will they bill you for their travel time? Who will be doing the work, and what is their experience and billing rates?

Industry-specific knowledge. In a few industries (nonregulated ser­vice businesses), prior industry segment experience isn't hugely important. But in many industries (ranging from food service to senior care to home improvement to education), a knowledge of the additional regulations that impact the business can be very help­ful. And in some industries that have complex regulatory concerns (medical franchising, health-care franchising, dental franchising, etc.), this industry-specific knowledge is vital. In areas like health-care franchising, for example, there are probably fewer than a dozen franchise attorneys with deep industry expertise.

Firm size. A larger firm can bring more resources to your engage­ment and can do more for you outside the franchise realm. At a larger firm, your franchise lawyer can bring in a specialist who can help with other transactions, trademark work, real estate, and other needs. Larger firms may have more connections within the franchise community and will often have formal educational programs that allow them to “cross-pollinate” when new ideas or issues arise. On the other hand, larger firms may delegate some of the drafting work to associates (not partners), who are less qualified than the partner you interviewed. While this allows them to work at a reduced fee (associates charge lower billing rates), it may make them less familiar with your documents when questions arise. A smaller firm or sole practitioner will provide you with more (or exclusive) access to a partner-level attorney. The downside is that there's no backup if the partner has a health issue or goes on vaca­tion. Accessibility may be more of an issue. And, of course, there are midsize firms that fill the gap between large and small.

Accessibility. All attorneys, in our experience, tout their accessibility. It's not always true. Perhaps more important than accessibility is communication style. Some franchise attorneys prefer email, and some prefer phone contact. If you have a preference, you should ask.

Location. This isn't much of an issue, as transactional attorneys can practice anywhere. Some lawyers do have occasional educational events at their offices, providing an opportunity for networking and learning. Closer is nicer, but it's largely irrelevant in your ultimate decision.

Personality. In most instances, you will be working with your fran­chise attorney for years. So if you do not like them, don’t hire them.