Judicial and Legal Support of Franchise Deals | Law&Trust International

Franchising is a form of running a business, in which the owner (franchisor) of a product, intellectual property or a unique production method (know-how) gets the opportunity to expand the presence of its products through affiliated dealers (franchisee).

In exchange for the opportunity to use the trademark, the franchisee receives continued support from the franchisor and the right to use the franchisor’s business system, pays the franchisor an initial fee and royalties.

In addition to a well-known brand, buying a franchise offers many other advantages that are not available to an entrepreneur starting a business from scratch. Perhaps the most important is that the franchisee is already receiving a proven system of work.

New franchisees can avoid the many mistakes that start-up entrepreneurs usually make because the franchisor has already developed daily operations on its own experience.

A good relationship between the franchisor and the franchisee is crucial to the success of both parties. Since franchising establishes business relationships for many years, the very foundation of the link must build carefully.

We recommend that every potential franchisee seek advice from a lawyer to fully understand the rights and obligations obtained under a franchise agreement and protect against costly mistakes. Legal support of franchising is a fundamental issue that will help to avoid further costs.

It is worth noting that the original franchisee is recommended to obtain a Franchise Disclosure Document (FDD). The goal of FDD is to provide the potential franchisee with information about the franchisor, the franchise system and the agreements that they will have to sign.

In addition to the disclosing part of the document, FDD may include the actual franchise agreement, as well as other contracts that the franchisee must sign, along with the financial statements of the franchisor.

FDD is intended to provide some information necessary to make an informed decision about investing in a particular franchise.

In some countries, such as the United States, the law requires mandatory FDD registration before the franchisee starts any franchise activity in the state. In the US, FDD must include information about:

  1. Franchizer
  2. Key employees of the franchisor company
  3. Experience leadership in managing a franchise
  4. History of bankruptcy and litigation of the franchisor
  5. The initial and ongoing fees associated with the opening and management of the franchise
  6. Required investments and purchases
  7. Rights to real estate
  8. Obligations of the franchisor and the franchisee
  9. Other franchisees in the system with contact information.

Moreover, in the USA, after the FDD is prepared to a potential franchisee, the signing of the main contract is governed by the "14-day rule". It is a "thinking over" period during which franchisors must give potential franchisees 14 days to consider their decision before they are allowed to sign a franchise agreement. When legally supporting a franchise, it is imperative to take into account such dates.

Franchise agreement

The franchise agreement is a more specific and intricate document than the FDD and is devoted to the terms of cooperation between the franchisor and the franchisee. We strongly recommend that you seek qualified help from franchising lawyers when agreeing, especially if you enter into a franchising agreement with a foreign company.

In general, due to preparing the contracts with franchisees, it is necessary to reflect the following:

  1. The franchise system, including the conditions for the transfer of rights to use intellectual property (including trademarks) and products,
  2. The territory in which the franchisee can use the franchise system,
  3. Rights and obligations of the parties: standards, procedures,
  4. Term (duration) of the franchise
  5. Payments made by the franchisee to the franchisor,
  6. Termination and (or)  right to transfer a franchise,
  7. Training, help and advertising.

The franchise agreement is a legally binding document that governs the relationship of the franchisee and the franchisor. The potential franchisee should carefully examine the franchise agreement and consult with a lawyer before making a final decision and sign the deal.

That is why any franchisor must protect its brand, as it is the most valuable asset. A brand is a collection of intellectual property and represents the company's culture, the company's beliefs, and attitudes towards customers. When a franchisor sells a franchise, the first of all gives new, often strangers, the opportunity to represent their brand. Moreover, the services provided by the franchisee will be associated primarily with the brand of the franchisor. So this is one of the most significant risks of franchising. The franchisee must establish clear rules for the use of all brand assets.

The brand of the franchisor must be registered as a trademark, as the prospective franchiser must have the right to grant licenses to its franchisee to use the brand name and (or) logo, which is associated with the business.

Instructions and business models should present in the form of a set of manuals (such as a tutorial, operating manual, systems manual, policy and procedural manual), which should provide a complete and detailed report on what the new franchisee needs to do to manage your business. It is imperative to ensure the protection of copyright on such documents.

Creating a franchise is an extremely complex and multifaceted task that needs to be entrusted to specialists.

Why Law & Trust International?

Lawyers of Law and Trust provide legal services for franchising, legal support services for franchise transactions, including registration of intellectual property, protection of corporate style, as well as patents and trademarks. We have accumulated rich and multifaceted experience since 2003. During this time, we have registered more than 3,000 intellectual property objects in more than 100 countries of the world.

Our team

Key benefits of legal services offered by Law and Trust International

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Experience and qualifications. The experience of the L&T International team is more than 15 years. It gives the opportunity for working with cases in many business areas like finance, IT, agriculture, trade and foreign economic activity. Thanks to this experience, our specialists always offer the best selection of services.
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Comprehensive approach and individual solutions. Law and Trust International always provides a vast range of services for our clients, taking into account the individual characteristics of each particular case. Due to this symbiosis, our specialists always fulfil all the wishes of clients in full and taking into account the requests and preferences of customers.
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Monitoring and innovation.Our team keeps tracking the newest and most advanced working methods, as well as the latest legislative, financial and economic information events around the world. It allows lawyers of Law and Trust International to quickly and creatively resolve virtually any issues in the field of legal consulting.
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Privacy and responsibility. The security of our customers' data and respond to them are particularly important in the work of Law and Trust International. For all the time of work, we have not had a single leak of commercial, personal or legal information. It allows us to develop, grow and achieve new opportunities.
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Reputation and result. A team of lawyers of Law and Trust International always welcomes the success of our clients. Reaching new results, we develop new skills that we successfully use in our work. Thanks to successful cases, our clients and our team, we are creating qualitatively new opportunities to achieve the desired result now.

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