VMM Managing Partner Joseph Milizio, head of the firm's Business and Transactional Law practice group, was interviewed in 1851 Franchise about "What Is a Franchise Lawyer and Why Would I Need One?"
The article can be read here and below.
In the world of franchising, where businesses expand by licensing their models to independent operators, the franchise lawyer plays a pivotal role. John Wood, founding attorney at Grant Park Legal Advisors, and Joseph Milizio, managing partner at Vishnick McGovern Milizio LLP, spoke with 1851 Franchise to shed some light on how franchise lawyers can help business owners navigate the complexities of the franchisor-franchisee partnership.
Defining the Franchise Lawyer's Role
According to Wood, a franchise lawyer's core responsibilities involve crafting, scrutinizing and negotiating franchise agreements and disclosure documents. These legal documents form the foundation of the relationship between franchisors and franchisees, outlining rights, responsibilities and expectations for both parties.
“A franchise lawyer is an attorney familiar with franchising, which involves licensing a business model, brand and intellectual property to independent operators.These attorneys may be working for the franchisors or the franchisee,” said Wood.
Because franchising operates within a highly-regulated environment, a franchise lawyer can be instrumental in making sure the franchisor complies with all of the rules and regulations. This typically involves guiding the franchisor and franchisee through the complex processes of registration and ongoing compliance.
“Franchises are more complex than they may seem on the surface. In many instances, franchisees will want an attorney to review and explain the Franchise Disclosure Document and the Franchise Agreement,” said Wood.
Milizio agrees with this sentiment and added that it is especially important to involve a lawyer, as much of the complexity and resulting risk in the investment is beyond the franchisee’s control. “Like any other investment, a franchise involves risks,” said Milizio. “It is largely contingent on the business health of the franchisor.”
Providing Further Advice on Operations, Marketing and Disputes
Beyond the legal paperwork, franchise lawyers provide valuable counsel on day-to-day operations, marketing strategies and compliance issues.
“The franchisee should understand they are potentially building a long-term relationship with the attorney they are retaining,” said Wood. “Does that attorney have the bandwidth to be able to serve their needs? Do they have the resources available to handle litigation should it become necessary?”
Beyond operational matters, franchise lawyers are able to step in to assist in resolving any disputes that might arise between the franchisee and franchisor.
The Franchisee's Need for Legal Guidance
Franchisees should meet with a franchise lawyer early in the process, before signing any contracts or submitting any paperwork. Milizio explained that this is because not all franchisors are forthcoming and transparent in the beginning stages.
“There are laws to protect investors from scam transactions, but not from poor resources or inadequate information. Before making a significant and long-term commitment of purchasing a franchise, you should always consult with an attorney,” said Milizio.
When it does come time to complete the paperwork, franchisees will benefit from the expertise of a franchise lawyer when it comes to navigating complex legal documents such as the Franchise Disclosure Document and Franchise Agreement. Wood highlighted the need for legal assistance when it comes to identifying potential issues and negotiating favorable terms.
“These documents form the basis of the franchisee's rights and responsibilities in operating their franchise location. The attorney can assist the franchisee in identifying red flags, hidden fees or unfavorable terms in the document and potentially help them negotiate a better agreement,” advised Wood.
Even after a franchise contract has expired, franchisees may still need the assistance of a franchise lawyer to ensure they continue to meet their obligations.
“Franchise obligations can continue after the expiration of a franchise in the form of non-compete agreements, loan and lease guarantees, and ongoing obligations for taxes and other expenses, so an attorney must be able to advise their client in many different aspects over the life of a franchise,” explained Milizio.
Selecting a Suitable Franchise Lawyer
It's important to find a franchise lawyer whose expertise matches your needs. “Although not every attorney practices in the area of franchise law, most attorneys know a practitioner they can refer you to,” said Milizio.
When selecting a franchise lawyer, Wood emphasized that franchisees should look beyond mere legal expertise. They should assess whether the attorney has the capacity to build a long-term relationship, has the resources for potential litigation and has experience in contract document review. It’s important for the franchisee and the attorney to share the same expectations of the relationship.
“Ask your attorney what you can reasonably expect from your engagement with them. No attorney can guarantee an outcome, but they should be able to give you a realistic assessment of the possible scenarios in your matter,” Wood said.
Wood also suggested that franchisees should do their homework to understand the attorney's billing process and set realistic expectations. Understanding how attorneys bill for their time and knowledge ensures transparency and helps franchisees avoid surprises.
“Understand their billing process; remember, the attorney is selling his time and knowledge, which means you pay for each phone call and email,” Wood explained.
That said, Wood also warned franchisees not to skip any steps in the legal review process to cut costs.
“Do not forgo having an attorney review documents for you,” said Wood. “Most franchises are significant long-term commitments, and dealing with any misunderstandings or disagreements regarding your franchise today will cost less than having to litigate them after the fact.”
Franchise Lawyers Play a Vital Role in Protecting Franchisees and Franchisors
Franchising is a complex landscape where legal intricacies often intertwine with business dynamics, which is why a franchise lawyer can be an indispensable asset. They can help clearly identify each parties’ responsibilities and expectations to build a successful, legally-sound franchise partnership.
