Legal Blog

Are Franchise Disclosure Document (FDD) Reviews Worth It?

An Attorney Q&A For Virginia, Maryland And The District Of Columbia

Attorneys are expensive.  I get it.  Nobody wants to waste money, and most franchisees are hesitant to spend more money than they have to in order to begin operations.  But skipping an attorney FDD review can be costly down the road. Below are some important questions I frequently receive from people considering whether or not to engage franchise counsel.

 

  1. Do franchisors negotiate their agreements?

Yes.  Many franchisors negotiate even if they claim they do not.  If they don’t, many franchisors will still clarify ambiguities and fix problems.

 

  1. If a franchisor will not negotiate, what good is a review?

A franchise attorney can identify areas which constitute overreaching by a franchisor and those which deserve attention. An attorney can also educate his client to spot important issues if they arise, including default notices and other signs that the franchisor may be unhappy with the relationship. A review can also help a franchisee determine if he or she is comfortable with the opportunity.

 

  1. If I already negotiated with the franchisor, why do I need an attorney?

To make sure the changes are properly implemented. Contract drafting is complicated and requires legal knowledge. If the franchisor is careless or untrained (or if the franchisor wants to be tricky) negotiated changes can be useless.  It is vital that the changes be reviewed by an attorney to prevent problems down the road and to make sure the changes do not conflict with the other franchise documents you sign.

 

  1. How long does an FDD review take?

An experienced franchise attorney can typically complete a review in two to four hours, depending on the attorney’s availability and the complexity of the transaction.

 

  1. How much does an FDD review cost?

That depends on the attorney and the structure. You should speak with the attorney to see if there are ways to keep costs down.  Typically this can be done if the parties set expectations at the onset. A good franchise attorney understands his client’s limited resources and goals.

 

  1. Other franchisees say they are treated well by the franchisor, so why do I need an attorney?

It is not uncommon for franchisors to be purchased and franchisors frequently undergo management and ownership changes as well.  The franchise agreement is the roadmap to the relationship. Franchisees need to understand that relationship to know what can happen if the franchisor changes its tune.

 

  1. Can’t my estate lawyer review the FDD for me?

Technically, yes.  But the results will not be the same. Franchise attorneys are trained to spot important issues from a franchising perspective. An attorney who is not trained this way will end up being inefficient and will cost his client money (not to mention focus on the wrong issues).

ABOUT BRIAN LOFFREDO

 

Brian is a commercial litigator with more than seventeen years of experience representing clients in the franchise industry. Brian routinely assists clients during the licensing and franchise/FDD review process, as well as with the resolution of franchise-related disputes, including those involving terminations, territorial disputes, fraud, disclosure/relationship law violations and breaches of contract.

In addition, Brian represents and counsels clients in the construction industry on matters involving litigation, construction defects, licensing and compliance, collections, mechanic’s liens, payment bond and Miller Act claims, contract drafting, and compliance with home improvement laws and other construction industry laws.

 

 

 

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