Running a franchise system, franchisors run into issues daily that can have legal consequences. But, when do you call an attorney? No one wants to be legally micromanaged, but there are situations that can have grave legal consequences. We picked out the top 6 times when you should call a franchise attorney. Here they are:
When you are thinking about putting a franchisee in default. Just because the franchise agreement says you can, it does not mean you can or should put a franchisee in default or take other diverse action against a franchisee.
When you are thinking about terminating a franchisee. Many state laws prevent you from terminating a franchisee without good case and proper notice. If you terminate a franchisee without following the law, you may be subject to years of franchisee loss profits.
When you are thinking about not renewing a franchise. State laws prevent you from not renewing a franchisee without good case and proper notice. If you do not renew a franchisee without following the law, you may be subject to franchise term of loss profits.
When you are thinking of sending out an email blast, doing an ad spot on the internet for prospective franchisees. Some states require the submission of ‘advertisements’ prior to publishing. Advertisement includes lots of different things. Another big worry is making an improper statement about the financial rewards of owning a franchise. A misstep in looking for franchise candidates can lead to federal and state regulatory compliance issue.
When you add or lose management or sales staff. The salesmen, officers, directors, and managers of your franchise system do matter. A change in your franchise sales or management team can be effected if someone buys a franchise. Your franchise agreement may need to updated.
When you are thinking of changing what you offer or require of franchisee. Whether it is the introduction of a new software system, product offering, service, or fee, if you change what franchisees are required to buy or use and it cost money learn, you may need to update your franchise disclosure document and you may not be able to require your existing franchisees to adopt the new initiatives.