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Franchising offers a turnkey option for starting your own business, but it can be tricky to navigate without qualified legal assistance. For the best chance at fulfilling the terms of your franchise agreement and seeing success, you can benefit from working with our franchise lawyers in Fort Worth.
At Luther Lanard, PC, we offer over five decades of combined experience advising clients on research, purchasing, managing, and exiting the franchise business model. We can begin at square one with you, or step in when you need us as your franchise matures.
We encourage you to reach out to us to learn more and understand how franchising works in the Metroplex. To get in touch with our Fort Worth franchise attorneys, contact Luther Lanard, PC today.
Why Fort Worth Franchise Owners Hire a Franchise Lawyer
Franchise law is highly specific and requires a legal team with a full understanding of how Texas law applies to you as a franchisee and your franchisor organization. For the most successful outcome, it’s wise to partner with a legal team that focuses on these matters.
Your franchise lawyer in Fort Worth will be on guard for possible pitfalls in franchise agreements and other documents. We are ready to represent you throughout the buying process, while you manage your growth, and in the event of disputes or litigation.
From start to finish, you can speak with a franchise attorney at our firm whenever you have questions or want guidance. We will be there to assist with every aspect of your franchise experience.
Franchise Disclosure Document (FDD) Review: What It Covers + Red Flags to Watch For
The Franchise Disclosure Document (FDD) is different from the franchise agreement. It’s critical to review them both with help from a skilled franchise attorney in Fort Worth before starting a business in Texas.
What Is Covered in a Franchise Disclosure Document
The 23 items within an FDD enable you to enter into the franchise agreement with a strong understanding of your future business partner and their performance. These items are:
- Franchisor’s background
- Background of the business
- Litigation history
- Bankruptcy history
- Initial costs and fees
- Ongoing costs
- Investment expenses
- Business and operational restrictions
- Location restrictions
- Financing
- Rules about advertising and training activities
- Your legal obligations
- Franchisor’s involvement
- Information about logos, service marks, and trademarks
- Information about proprietary and intellectual property
- Expectations for franchisee
- Updating, renewing, transferring, or terminating an agreement
- Relationships between franchisors and public figures
- Financial performance of the franchise
- Growth, turnover, and prior franchise data
- Financial records for the franchise
- Copy of the proposed franchise agreement
- Confirmation that you received the FDD
Item 19 discloses franchise earnings claims, which are what you could expect to earn from running a franchise. You can compare them to Items 5, 6, and 7 to assess how those projected earnings balance against your start-up costs. You can also speak to existing franchisees and review the company’s audited financial statements for deeper insight.
Franchise Agreement Review & Negotiation: The Clauses That Matter Most
When your franchise agreement lawyer in Fort Worth conducts their legal review, they will be looking for anything that indicates you should request greater detail. You should most closely consider these clauses:
Royalty Structure and Fees
Your franchise purchase includes the right to operate a business with trademarks, patents, and copyrights created by the parent company. Your franchise attorney can identify the extent of your royalties, initial fees, system change costs, and advertising support. Royalties will increase as your business grows, and so will expenses and overhead. Ask your attorney to verify that your royalty percentage is based on net sales instead of gross revenue.
Term and Renewal
Unless you examine and possibly negotiate this clause at the beginning, you could face unexpected costs to renew your term with the franchisor. Watch out for renewals that require investments of the full franchise fee or other unjustified increases.
Termination and Default
In the event you need to sell, transfer, or otherwise terminate the agreement, examine the clause discussing those situations and any matters that could result in the franchisor claiming a default. Read through the options for curing the default and time periods, and your methods for resolving disputes.
Territorial Rights
You should ensure you have sufficient territorial rights to support growth and success, without encroachment by the franchisor. If they place another location or a competing product in your area, you should have clearly defined methods to address the matter through mediation or litigation.
Transfer Rights
Selling your location involves transferring your franchise to the buyer, which can come with substantial restrictions. This clause is likely worded to protect the franchisor’s interests, but work with your franchise agreement lawyer in Fort Worth to verify that you have appropriate rights and fees aren’t punitive.
Non-Compete Clauses
If you terminate your relationship with the franchisor, they may attempt to activate their non-compete clause. Yet if the clause is highly restrictive, your franchise attorney in Fort Worth can push back to renegotiate it.
Due Diligence Checklist Before You Sign
Due diligence means investigating potential issues before they derail your plans. The International Franchise Association (IFA) recommends asking specific questions before signing your agreement. Your franchise disclosure document (FDD) attorney can identify many of the answers from the FDD, but it also helps to ask them when speaking to a franchisor representative. These include:
- What is the franchise? (Item 1)
- What will my costs be? (Items 5,6,7, 8, and 11)
- Does the franchisor provide funding? (Items 10 and 19)
- What can I expect to earn? (Item 19)
- How does your franchise system operate? (Items 8, 11, 12, and 16)
- What are the franchisor’s obligations to me? (Item 11)
- What are my obligations to the franchisor? (Item 9)
- What intellectual property does my license cover and for how long? (Items 13 and 14)
- What technology must I purchase and use? (Item 11)
- Who can I contact to speak about the ownership experience? (Item 20)
- What are the terms for renewing my agreement or exiting the system by transferring or selling my franchise? (Item 17)
Another due diligence task is making validation calls to the current or former franchisee owners listed in Item 20. You can get a better idea of the actual franchise experience from those who have spent time in the franchisor’s system.
Buying or Selling a Franchise in Texas: Transfer Approvals, LOIs, and Deal Documents
Our franchise attorneys in the Dallas area can advise you on each step in the process of buying and selling franchises, such as determining the extent of what’s included in your purchase. Purchasing an established business gives you a head start on building your customer base, but it also comes with concerns for maintaining it.
The Small Business Administration (SBA) provides an outline of what to consider. Another useful source is the Consumer‘s Guide to Buying a Franchise from the Federal Trade Commission (FTC). Once you’ve chosen a candidate, we guide you with critical deal documents, such as your Letter of Intent (LOI) for a commercial lease and the sales agreement.
When it comes time to sell your franchise, our team can draft necessary documents, review the terms of obtaining the franchisor’s transfer approval, and overcome franchisor actions to stop the sale. We negotiate on your behalf, protecting your interests and aligning with your goals.
Disputes & Enforcement: Termination, Nonrenewal, Encroachment, and Lease Conflicts
Every business owner faces disagreements and conflicts, but some require legal intervention and can jeopardize your establishment if you’re not prepared. You can often resolve issues by speaking with your franchisor representative, but you should also understand when to choose mediation vs. litigation.
Here are common topics around disputes and contract enforcement that our franchise attorneys in Fort Worth can assist you with:
- Termination: You have the right to terminate your agreement if you sell or transfer the business, but the franchisor may end the agreement if you don’t meet your obligations regarding system changes, royalties, or image standards.
- Nonrenewal: Franchisors may claim non-performance, breach of contract, or other issues for nonrenewal when your initial franchise period ends. You have the right to rebut with appropriate evidence, and our franchise agreement lawyers can help you address the conflict.
- Encroachment: When the franchisor allows new locations in your agreed territory, you have the right to dispute franchise encroachment and protect your business interests.
- Lease Conflicts: Along with franchise agreements, you likely need to review common recommendations for retail tenants regarding your commercial lease. We can assist in negotiating those contracts or managing disputes with your landlord.
Luther Lanard, PC remains focused on providing the smoothest experience for franchise clients, from finding the right fit for a first-time franchisee to avoiding costly mistakes in multi-unit agreements. At every stage, we are prepared to reduce friction and issues that may challenge your success.
What to Expect Working With a Franchise Law Firm
The Fort Worth franchise lawyers at Luther Lanard, PC will prepare necessary documentation, review contracts, and schedule meetings to discuss our recommendations. We apply our deep knowledge and strong background in franchise law to your unique situation.
Your franchise attorney can negotiate terms and manage disputes, but is always prepared to bring their litigation experience to bear when another party fails to act in good faith. With this balanced approach, we can boast numerous results for clients who benefited from partnering with our firm.
Throughout our work with you, you can rely on regular and thorough updates, communicated to you in your preferred medium. Our team will draft and review deliverables with you to reach a satisfactory strategy.
Contact Our Franchise Lawyers in Fort Worth, TX
Franchise law is unique in Texas, and you can benefit from working with a franchise attorney in Fort Worth and Tarrant County who is dedicated to your investment and success. No matter where you are in the franchise management timeline, Luther Lanard, PC, can support your goals. To book a consultation with our team, contact our franchise law firm today.
Frequently Asked Questions About Franchise Law in Texas
Below are answers to common questions from franchisees in the Metroplex.
Are franchise agreements negotiable in Texas?
Many franchise agreements are non-negotiable, but you and your franchise agreement lawyer in Fort Worth should still examine yours closely for potential red flags. You can then present possible amendments to the franchisor. The American Bar Association (ABA) identified common clauses that may tilt unfairly against you, including those about territorial rights, dispute management, required supplier contracts, and system changes.
How much does it cost to hire a franchise lawyer?
Franchise law is extremely complex, and each purchase or sale is unique, requiring highly skilled legal representation. We recognize that you want high value at a fair cost. We offer a value-focused pricing system that includes flat-fee packages for reviewing your franchise agreement, choosing your business entity, or assisting you with a commercial lease.
When matters become more complicated, our team can estimate your fees at an hourly rate and arrange for flexible payment programs. We do not believe in surprise billing, and keep you aware of changes so you can factor our assistance into your plan for success.
When must a franchisor provide the FDD, and how long do I have to review it before signing?
When you consider franchise opportunities, your research begins by requesting a Franchise Disclosure Document (FDD) from each franchisor. This outlines their market performance in the previous decade, but it’s not the full picture. You can request a franchisor’s FDD as soon as they receive or accept your application.
According to the Federal Trade Commission (FTC) Franchise Rule, the franchisor must provide the FDD at least 14 calendar days before you sign or pay anything. Item 23 of the FDD is a section where you will sign and date that you received the document, which starts the clock. That is when you and your franchise disclosure document (FDD) attorney in Texas can begin your review.
What are the most common “deal-breaker” red flags in an FDD?
Just because a franchisor is large and successful, it does not mean they may attempt to cover unfair terms in the FDD. Here are some frequent red flags our franchise lawyers in Fort Worth think you might consider “deal-breakers”:
- Overly aggressive royalty payment programs including high minimum royalties
- Hidden fees
- Non-compete clauses that restrict you beyond opening another franchise
- Unfavorable choice-of-law clauses or dispute management terms
- Personal guarantees that put your personal assets at risk
- Supply chain obligations without options for disruptions
- Inadequate protection against territory encroachment
- Vague renewal terms
Presale disclosures typically fall under the Texas Deceptive Trade Practices Act (DTPA), giving you the right to report violations.