The importance of seeking legal advice

Ed Savory, an Associate in Leathes Prior’s Franchising Team, provides prospective franchise owners with some useful guidance to taking legal advice

One of the biggest questions you need to ask yourself when entering a Franchise Agreement is: ‘how do I go about getting good legal advice?’

Franchising is quirky. You should, therefore, seek the advice of a solicitor who really understands franchising, is active in the sector, and ideally one who is affiliated to the British Franchise Association (bfa) who will be able to advise you on the bfa’s Code of Ethics.

If you choose a solicitor who advises both franchise owners and franchisors, they will understand all sides of the relationship and should be able to highlight any issues and explain what is and what is not typically acceptable in a franchise.

The franchise owner advisory market is very competitive and the level of fees you should expect to pay will generally be lower from a bfa affiliated solicitor than from someone who charges on an hourly basis.

Shop around

You should contact a handful of solicitors. When speaking to them, ask yourself whether you feel that you have confidence and trust in them. You should ask for references from other prospective franchise owners they have recently advised. Good advice is all about value rather than price, so find out what you will actually receive and the relevant timescale for the fee you are being charged.

For example, we always provide prospective franchise owners with the following:

• Legal Report (including some general introductory advice to the UK’s franchising sector)
• Meeting/telephone consultation
• Company search on the franchisor company
• Intellectual Property Office search into the franchisor’s trademark
• Copy of the bfa’s Code of Ethics
• Services

You may only be contemplating taking legal advice in respect of the Franchise Agreement, but there may be further advice you require. For example, regarding your business structure – sole trader, partnership, limited liability partnership (LLP), or company – premises leasing, employment law and, further down the line, advice on resolving any dispute with the franchisor.

So find out the extent of legal services the firm of solicitors in question is able to offer. If you are able to build a good relationship with your solicitor from the outset then you should be able to benefit from ongoing support and advice going forward.

Understanding

If your solicitor does not understand the franchise in which you are planning to enter, then it is unlikely that they will be able to provide relevant commercial advice. While franchised businesses have a lot in common with each other, they do vary hugely depending upon their specific nature. For example, a premises-based franchise with large numbers of employees is fundamentally different to a ‘man and a van’ operation.

You should expect your solicitor to research the franchise to make certain that the legal documentation into which you will be required to enter is appropriate.

Fixed fee

Carrying out a full and thorough review of a Franchise Agreement and providing a full written report on it takes a considerable amount of time. Nevertheless, you are the customer and the market currently dictates that you should expect to be provided with a fixed fee quote in advance for the advice being taken. You should be clear as to precisely what such a fixed fee quote includes and does not include.

The fixed fee should include a consultation meeting/phone call to run through the legal report so that you can ensure that you have fully understood all the provisions of the Franchise Agreement and their full commercial implications.