Franchise Law
We charge Franchisees a flat $1,850.00 to review franchise documents.
For Franchisees — Hire an attorney who writes franchise documents and knows the FDD inside and out. The review fee includes the following services: an initial client conference, a review of the FDD (including the FA and ADA, if applicable), a second conference to advise you on the import of the documents, and finally, follow-up with a written bullet list of flagged items. We will advise you of any unnecessary restrictions or waiver of rights found in the FDD/ADA, so that you may decide whether to walk away or execute the documents in full awareness of the franchise’s risks and potential benefits.
Post-review period, you will find our hourly fee very competitive with firms in the region. Our post-review services include negotiation of franchise terms (hourly), and formation of your entity (limited liability company or corporation — this item is charged on a flat rate basis). In addition, we review and negotiate your commercial lease, or negotiate the purchase of property in instances involving a brick and mortar franchises.
For Franchisors — We charge a competitive fee to draft your franchise documents, which includes the following services: consultations to discuss strategies for building the franchise system, and crafting an FDD to be compliant with not only FTC regulations and the NASAA standards, but in preparation for the most stringent of state registration examinations, as well. Our goal is to prepare an FDD ready for issuance and sale in non-registration jurisdictions, or ready for review and approval by state examiners in registration jurisdictions.
For both Franchisees and Franchisors — We are available to mediate disputes at a reasonable hourly rate, which is competitive to the national alternative dispute resolution forums. In addition to fifteen years of franchise experience, which includes ongoing representation of a national franchise (registered in several jurisdictions), Kevin Kilcommons holds a certificate in mediation, per New Jersey Court Rule 1:40, which was issued upon successful completion of forty-hours of training.
For many years, Kevin volunteered his mediation skills to the New Jersey Superior Court, which started when he was a judicial law clerk in the 1980s, and continued years later as a member of a county bar panel handling divorce mediation. Kevin is also trained in and practiced collaborative law. From his extensive training and experience, Kevin is well-qualified to mediate commercial disputes, and especially franchise matters. (NOTE, if your FA’s designated dispute resolution forum cannot guarantee a mediator with substantial franchise expertise, then consider consenting to engaging Kilcommons Law to assist in resolving the dispute.)
THE FRANCHISE MODEL
The franchise model has proven to be a very effective method for conducting business. In short, it allows an entrepreneur to develop a business model, including trademarks, systems and support modes specific to a particular trade or industry, and then solicit franchisees to invest their capital in the business model and assume much of the market risks. In return, the franchisor collects royalties and fees. For the franchisee investing their assets in this venture, the franchise provides a brand name and in-place systems, thus allowing them a quicker entry into a given industry.
THE SUCCESS OF THE FRANCHISE BUSINESS MODEL
To put the success of this business model in perspective, consider that in 2022, there were approximately 790,000 franchises in North America, which generated $825 billion dollars in revenue. In 2023, the growth of franchise businesses is expected to be 3%, with a forecast of $8.7 billion dollars in revenue, together with an increase of 254,000 jobs (as reported by The International Franchise Association together with FranDate: See www.franchise.org/sites/default/files/2023-03/2023-Franchising-Economic-Report.pdf) Prior to the Great Recession, there were 770,835 franchises, generating $675 billion in revenue. Therefore, franchise businesses make up a very substantial portion of small businesses in the United States, and greatly impact the nation’s GDP.
FACTORS TO CONSIDER WHEN BUILDING A FRANCHISE BUSINESS
A major factor to consider in building a franchise network is government oversight. The Federal Trade Commission is tasked with regulating the national franchise market. http://www.ftc.gov/ However, state governments also play an essential role in oversight of franchise activity. There are numerous states in which a Franchise Disclosure Document (or Circular) must first be filed, or reviewed and approved by that state’s securities officials before franchise sales may take place in the jurisdiction. Failure to comply with registration state requirements may result in severe monetary penalties and perhaps injunctions to halt the franchisor’s activities. Moreover, other states have business practice laws which may also impact franchise relationships.
Therefore, it is essential at the formation stage of your franchise company to become educated about the common, federal regulatory environment, as well as state-specific requirements, to assure that your model and practices comply with the jurisdictions in which you seek to sell franchise rights.
THE OTHER SIDE OF THE BUSINESS – THE FRANCHISEES
On the other side of the franchise spectrum, are the franchisees. Franchise business owners require experienced franchise attorneys to protect them from aggressive franchisors. It is the franchisee attorney’s job to hold the franchisor to the terms of the Franchise Agreement, and oftentimes to identify Disclosure Document (Circular) terms or procedures which violate federal statutes, FTC regulations, or applicable state securities/franchise statutes/regulations.
Additionally, Franchise Agreements universally require alternative dispute resolution (mediation and arbitration), as opposed to traditional litigation, to resolve disputes. Therefore, your attorney should have experience advocating clients’ positions and claims before arbitration forums, such as the American Arbitration Association. Kilcommons Law has this experience, and is available to mediate any dispute between the parties.
Let Kilcommons Law take the field for your franchise business.
This article is not intended to be relied upon as advice for your particular circumstances. Therefore, consult with a qualified FRANCHISE ATTORNEY before offering or signing a franchise agreement.
© Kilcommons Law, P.C. 2023