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Purchasing and running a franchise requires many steps and legal considerations. Failing to do your due diligence or follow the terms of a franchise agreement can land you in serious legal trouble. It can result in significant financial losses as well. If you are considering purchasing a franchise, operating a franchise, or exiting a franchise, our experienced franchise lawyer San Francisco law firm can help you navigate the complex process and protect your rights.
The team at Luther Lanard, PC is ready to help you secure and build your franchise. When you hire us, you benefit from 100 years of combined experience. We have navigated numerous situations and gotten results for our clients so they can continue to fulfill their dream of business ownership. No matter what challenges you are facing as a franchisee, our team is here to provide support.
What to Expect When Considering a Franchise in the San Francisco Bay Area
Buying into a franchise can be a great opportunity when you want to run a business without the startup and overhead costs you would have as an independent business owner. You can benefit from an established business model that has a proven track record of success. However, it is important to make sure that purchasing a franchise is the right fit for you, and to do your homework before signing any agreement.
To make sure you are fully protected, it is important to work with an experienced franchise attorney in San Francisco, CA who knows what to look out for. They can also help you consider the risks of buying a franchise, such as economic factors, regional factors, available capital, and evolving trends. With their help, you can rest assured that you will have the resources you need to succeed.
Franchise Services Offered by Luther Lanard, PC
Regardless of what stage you are in as a franchisee, Luther Lanard, PC can assist you with a variety of needs. Our team has extensive legal knowledge and provides you with business services and customized support.
With the help of our franchise lawyers in San Francisco, we can create an effective action plan to attain the results you need. We also provide creative solutions to problems that arise over the lifetime of the business. We are equipped to help you in the ways outlined below.
Buying and Selling a Franchise Business
Buying or selling a franchise is a big decision that involves many considerations and steps. You should consult a lawyer from the outset to determine what actions you must take and what your options are under the law or a franchise agreement. A lawyer will help you review the company, draft agreements, develop a strategy, and protect your finances and other assets. These processes can be lengthy, but legal representation can reduce the time it takes to complete the process.
Franchise Review
When you are considering purchasing a franchise, you must do your due diligence to make sure it is the right business opportunity for you. This means reviewing the franchise’s history, financials, and what your obligations would be as a franchisee. The franchisor will provide you with this information during the process, and it is important that you have a lawyer conduct a franchise legal review. This information provides insight into whether or not it is a good investment and the right business opportunity for you.
Lease Negotiations
Once you find a physical location for your franchise, you will need to negotiate the terms of your lease. This is important to ensure you do not assume undue risk should something unexpected arise. Lease agreements will typically favor landlords, but you have the right to request adjustments before signing the contract to better protect yourself. Your lawyer can communicate these aspects on your behalf so you are satisfied with the agreement before you sign your lease and move in.
Encroachment
There are often specific rules that govern the location and proximity of franchises, and these rules will be included in your franchise agreement. If another franchisee or your franchisor infringes on your area, you could suffer a significant loss of revenue. A San Francisco franchise lawyer can help you recover your losses in these situations by holding the other party liable for the damages they caused. Your lawyer will review your franchise agreement and advise you on how to move forward and advocate for you on your behalf.
Dispute Resolution
Disputes can arise over the course of the relationship between a franchisor and a franchisee. While franchisees may not have as many rights available to them as franchisors, they still have options to take legal action in certain situations. Before doing anything, you must consult a skilled lawyer who can identify effective methods for resolving the dispute as quickly and satisfactorily as possible. While litigation may be necessary, your lawyer will often use other methods first to save you time and money.
Understanding the Role and Importance of the Franchise Disclosure Document
The Franchise Disclosure Document (FDD) is a list of 23 specific pieces of information that a franchisor is legally obligated to provide to prospective franchisees. The purpose of this document is to ensure transparency about the business so a prospective franchisee can make an informed decision about moving forward. Franchisors must provide the following information in the document:
- Information about the franchisor’s history
- Franchise history
- Any prior or ongoing litigation
- Whether or not the franchisor has filed for bankruptcy
- Initial costs associated with buying and setting up the franchise
- Ongoing franchisee costs
- Expenses associated with investing in the franchise
- Restrictions on the business and how it operates
- Location restrictions
- E-commerce restrictions
- Advertising and training restrictions
- Legal requirements for the franchisee
- Level of franchisor involvement
- Logo, trademark, and service mark information and guidelines
- Intellectual property and proprietary information
- Franchisee obligations
- Rules of amending, renewing, transferring, or ending a franchise agreement
- Information on any relationships between the franchisor and public figures
- Information on the franchise’s financial performance
- Data on growth and turnover rates about the franchise
- Financial records
- Proposed franchise agreement copy
- Confirmation that FDD was received by the prospective franchisee
Each piece of information is designed to provide a thorough picture of the franchise’s history and health. Franchisees have the right to all of this information if they are serious about purchasing a franchise, according to the franchise rule. This requirement is enforced by the Federal Trade Commission, and legal action can be taken if a franchisor fails to provide some or all of this information or provides false information instead.
California Provides Legal Protection Against Deceptive Business Practices in the San Francisco Bay Area
Franchisees are protected by state laws from franchisors who engage in unfair or deceptive business practices including by the California Franchise Investment Law. Franchisors may provide false or incomplete information to prospective franchisees or use unethical practices that they may, in turn, expect from franchisees.
While franchisees would ideally discover these aspects before purchasing a franchise unit, they may not always be evident until after the franchise agreement has been drafted and gone into effect. At this point, a franchisee has the right to recover their losses by taking action against the franchisor. It may also give franchisees grounds to end the agreement and walk away without further loss or serious repercussion.
California has three key laws that outline the scope of deceptive and unfair practices and their penalties. These laws also provide recourse for those negatively impacted by these practices so they can recover their losses. If you know or suspect your franchisor has been engaging in deceptive activity, take legal action immediately and consult your lawyer. They can determine which of the laws below apply to your situation.
California Franchise Investment Law
California provides a private right of action for violations of the Federal Trade Commission’s Franchise Rule. These violations can include a franchisor selling a franchise without being registered, a franchisor failing to provide a franchise disclosure document or provide the requisite waiting period, or providing false statements or omissions of material fact either in the disclosure document, verbally or in other documents provided to the franchisee as part of the sales process.
Unfair Competition Law
California defines unfair competition as any activity that is illegal, fraudulent, or unfair and used to mislead or deceive others in business. In the event that a franchisor engages in unfair competition, the court can issue an injunction to immediately stop the franchisor’s illegal activity. The at-fault party must compensate you, as the franchisee, for any losses you sustained as a result. They can also be fined up to $2,500 for each offense.
False Advertising Law
False advertising is illegal in California, and franchisors who commit these acts can be penalized. According to California Business & Professions Code § 17500, businesses and individuals are prohibited from making statements about products or services that are untrue in order to get a consumer to buy the service or product. False advertising is a misdemeanor offense in California that could result in 6 months or less in jail and/or a fine of up to $2,500.
Common Methods Used to Resolve Franchise Disputes in San Francisco
Another key area that franchise lawyers in San Francisco, CA can help you with is dispute resolution. Disputes arise between franchisees and other parties and often need outside help to fairly settle the matter. Franchise disputes can come in many forms, ranging from contract violations to terminations and nonrenewals. Every type of dispute is nuanced and requires a different approach. Conflicts are also as unique as the parties involved, and require a tailored and strategic approach to resolve.
There are a few methods that a lawyer may suggest to help you and the other party reach an agreement that is satisfactory to you both. How your conflict is resolved will depend on the details of the situation, the severity of the conflict, and the willingness to work together, to name a few. Your lawyer will make recommendations and help you move forward with one of the following methods:
- Negotiation: An informal approach to conflict resolution that involves communicating with the other party to reach an agreement that settles the matter.
- Mediation: Both parties meet together, along with a mediator who remains objective and can foster discussion to help each party work together to reach a decision.
- Arbitration: Both parties meet with an impartial arbitrator who hears arguments by both parties and issues a decision at the end to settle the dispute.
- Litigation: A formal approach that involves both parties presenting their arguments and evidence in court for a judge to decide on.
Regardless of which option your lawyer suggests, they will remain by your side, guiding you through the process so you can settle the matter as swiftly as possible. Franchise disputes can significantly disrupt your business and create a lot of uncertainty, so it is important to openly communicate with your lawyer when you have so much at stake. They will protect your rights and provide unwavering advocacy throughout your case.
Legal Representation Provides Franchisees With Invaluable Help
Our Franchise attorneys in San Francisco, CA are adept at assisting prospective and current franchisees along their business journeys. From the moment you retain legal representation, they will work diligently for you by reviewing documents, drafting agreements, and negotiating on your behalf. Franchise lawyers are skilled communicators with a deep knowledge of the law. They also use their many resources in the San Francisco Bay Area to better serve you and ensure that you secure a successful outcome.
Contact our Franchise Lawyer San Francisco CA Law Firm
Regardless of your franchise needs, Luther Lanard, PC is equipped to provide you with sound legal advice to help you secure the outcome you are seeking. We look out for you and your interests to make sure that you are not risking your assets or being taken advantage of. Our team has extensive experience, and we tailor it to fit your circumstances. Contact us today to schedule a consultation with our franchise lawyer San Francisco team and let us help you with your franchise needs.