THE FRANCHISE GUIDE
DOING YOUR DUE DILIGENCE The important legal aspects to consider before buying a franchise
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ranchising is about sharing success—the business model makes for a mutually rewarding relationship between franchisors and their franchisees. But because the franchise business model is also built on contracts and other documentation, the relationship can be a complex one. Luckily, there’s help for prospective franchisees in wading through the paperwork: here, we take you through the legal aspects you need to consider before you begin, including the rights and obligations of the franchise relationship. Franchise legal counsel It’s vital for you to fully understand all documentation involved in your franchise investment, particularly the disclosure document (a comprehensive summary of pertinent information about the franchise system, its officers, finances, etc.) and the franchise agreement. As a potential franchisee about to invest your time, effort, and money, you should have a complete understanding of the relationship you’re about to enter. This is where an experienced franchise lawyer comes in.
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So, where can you find a franchise lawyer? Prospective franchisees can find a lot of the information they need online, through sites like the Canadian Franchise Association (CFA) directory of franchise support services members. You can also turn to page 67 of this issue, where you’ll find a list of Franchise Lawyers Across Canada, including details about all CFA member lawyers. Although these are great tools for initial inquiries, prospective franchisees should speak and meet with lawyers before retaining one. When selecting a lawyer, there are a few things you should consider. Look at the lawyer’s experience— have they dealt with the franchise you’re interested in before? How often have they acted for franchisors and franchisees? A large part of researching the franchise system involves reviewing its disclosure document and agreements. When meeting with a franchise lawyer, you’re advised to bring in everything you’re being asked to sign, from the franchise agreement itself to any leases or other contracts. These are usually standard documents,
Canadian Franchise Association www.cfa.ca | www.FranchiseCanada.Online
