As an adjunct to our Corporate and Capital Markets practice, Calfee counsels companies regarding franchising and other product and service distribution models.
We begin the process by assisting clients in deciding the best way to franchise or otherwise market their products or services, and then we continue with preparing and negotiating all related documents.
Our goal is to assist clients in developing and implementing a franchise system or other business model that best suits each client’s needs.
Calfee's franchise attorneys discuss with clients the elements of franchising and how they often overlap with other forms of distribution, marketing and operations. We assist in deciding whether a business should be conducted as a franchise or under a different business model, including a critical analysis of the risks and benefits of each.
- Representation of various franchisors, including assistance with the drafting and negotiation of Franchise Disclosure Documents, franchise agreements and related documents.
- Ongoing counseling to companies that serve as franchisees of numerous franchises, including the negotiation of franchise agreements and multi-unit development agreements.
- Counseling of franchisees with respect to other legal matters, including entity formation, financing arrangements, and lease agreements.
- Counseling business owners in the implementation of a franchise system or, in the alternative, sales representative and distribution arrangements, including the drafting and negotiation of related documents.
- Counseling of sales representatives and distributors, including negotiation of contracts.
- Preparation of Franchise Disclosure Documents
- Drafting and negotiation of franchise agreements
- Drafting and negotiation of multi-unit franchise development agreements
- Advice regarding compliance with federal and state franchise laws
- Drafting and negotiation of various sales representative, distribution and license agreements
- Drafting and negotiation of real property leases
Do franchise laws apply to businesses using distributorships or sales representative agreements?
Sometimes. Regardless of what label a business may give its distribution or marketing system, it will be subject to federal and state franchise laws if the elements of a franchise are present. Business owners must understand the differences between franchising and other methods of distribution and marketing and then determine which system best fits their business.
How do franchise laws affect franchise businesses?
The intent of franchise laws is to prevent franchisors, who are perceived to have more market power and business sophistication than most franchisees, from taking advantage of a potential franchisee through a failure to disclose material terms of the franchise relationship. If a distribution or marketing system qualifies as a “franchise” under applicable law, then, regardless of the label applied to the system by the business owner, a comprehensive disclosure document called a Franchise Disclosure Document must be prepared. The FDD summarizes in detail the business history and experience of the franchisor and the contractual obligations that will be imposed upon the franchisee. Federal and state laws generally restrict discussions between a franchisor and franchisee until after the FDD has been delivered to the prospective franchisee. In some states, the FDD must be submitted to a state agency for review and/or registration.
An unwary business owner may discover too late that his or her business qualifies as a franchise system that is subject to federal and state franchise laws. Proper planning prior to the establishment of a business model can ensure that the chosen model complies with (or, if desired, avoids) applicable franchise laws.