13 Questions To Ask Your Lawyer Before Buying A Franchise

Thinking about taking the plunge and buying a franchise business? It’s a thrilling venture, no doubt, but before you dive in headfirst, there’s one crucial step you shouldn’t overlook: consulting a lawyer. Now, you might be wondering, why exactly do you need legal advice for something as seemingly straightforward as buying a franchise? Well, let us enlighten you.

First and foremost, let’s talk about the franchise agreement. 

This document is the holy grail of franchising—it lays out the rules of the game for both parties involved, the franchisor, and the franchisee. Inside, you’ll find everything from fees and royalties to operational guidelines and territory rights. Sounds important, right? That’s because it is. Understanding the ins and outs of this agreement is key to protecting your interests and ensuring a smooth sailing franchise purchase.

But wait, there’s more. Ever heard of restrictions and limitations?

They’re like the guardrails on a highway—they keep you from veering off course. In the world of franchising, the franchise agreement often imposes restrictions on things like location, marketing methods, and product offerings. These restrictions are designed to maintain brand consistency and safeguard the franchisor’s interests. Knowing what you’re getting into upfront can save you a world of trouble down the line. And, knowing that what you’ve been told will be included is actually included is something your lawyer will confirm. 

Now, let’s talk money. 

Fees and royalties may not be the most exciting part of franchising, but they’re certainly important. As a franchisee, you’ll typically pay an initial franchise fee for the right to use the brand and operating system, along with ongoing royalties based on your sales. And that’s not all—there may be additional fees for things like marketing and training. Understanding the financial implications of your franchise investment is crucial for making informed decisions and avoiding any unpleasant surprises.

Support and training are also key components of the franchising experience. 

A good franchisor will provide you with the tools and guidance you need to succeed, from initial training to ongoing support. But don’t just take their word for it—make sure it’s spelled out clearly in the franchise agreement. After all, you want to know that you’ll have the resources you need to thrive as a franchisee.

And let’s not forget about territorial rights. 

Where you can operate your franchise can have a big impact on your success. That’s why it’s important to understand your territorial rights and any potential disputes that may arise. A lawyer can help you navigate these tricky waters and ensure that you’re operating within the bounds of your agreement.

But perhaps the most important reason to consult a lawyer when buying a franchise is to protect yourself from legal pitfalls. From reviewing financial disclosures to conducting due diligence on the franchisor, a lawyer can help you identify potential risks and liabilities before they become serious problems. And in the world of franchising, an ounce of prevention is worth a pound of cure.

Before purchasing a franchise be sure to ask your lawyer these 13 questions and ask them to answer them in layman’s terms without the contractual jargon so that you fully understand what you are in for if you decide to move ahead.

1. What are the key terms of the franchise agreement, and what obligations do I have as a franchisee?
2. Are there any restrictions or limitations on my ability to operate the franchise in a certain location or manner according to the franchise agreement?
3. Can you explain the fees and royalties associated with the franchise, including any ongoing payments or contributions?
4. What support and training will the franchisor provide, and are there any specific performance standards or benchmarks I need to meet to maintain my ownership?
5. Are there any territorial rights or protections provided by the franchise agreement, and how are disputes over territory resolved?
6. What rights do I have in terms of renewing or terminating the franchise agreement, and what are the consequences of doing so?
7. Can you review the franchisor’s financial statements and disclosure documents to ensure they are in compliance with relevant laws and regulations?
8. Are there any pending legal actions or disputes involving the franchisor that I should be aware of?
9. How can I protect my intellectual property rights, including trademarks and proprietary information, within the franchise system?
10. Are there any specific insurance requirements or recommendations for operating the franchise?
11. Can you provide guidance on local regulations and licensing requirements that may affect the operation of the franchise?
12. What are the potential risks and liabilities associated with owning and operating this particular franchise?
13. Are there any other legal considerations or concerns that I should be aware of before moving forward with the franchise purchase?

Your lawyer should be a key player in your business buying decisions whether buying a business, selling a business, or entering into a partnership agreement. 

You should trust your lawyer, believe in their expertise, and look to them for guidance as needed in your business ventures which is why it’s important you find the right lawyer to work with. 

The most important question to ask your lawyer – “Is there anything we should change in the agreement to clarify the details or are any corrections needed according to the law?”

At Hukam Law, we offer extensive experience in assisting individuals like you with purchasing franchises in Canada. Our team assists you throughout the entire process, ensuring your investment is protected and your business is primed for success. In addition to our vast franchising expertise, we prioritize informing our clients about their contractual rights and obligations and make sure that everything is documented correctly and legally so that you don’t run into any surprises or issues along the way.

If you’re in the first stages of buying a franchise, or you have questions about a franchise you are operating currently, give us a call 📞 at 705-915-0884, or send us an email at info@hukamlaw.ca. We’ll make sure that you have the representation you need in your business transaction and guidance you can depend on at each turn of the road.

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.