Notable Franchise Legal Topics You Need to Know

What is a legal topic that more people in franchising need to know about?

"The NIL—name, image and likeness— world is exploding in connection with college athletics. Many franchise operations appear anxious to get in on the action but have failed to consider all of the pros and cons including legal ramifications in doing so."

—Chris Bussert, Kilpatrick Townsend and Stockton

"More people should appreciate the limits imposed by our courts on the scope of the duty of good faith. People in franchising (including litigators) often raise allegations of bad faith without connecting those allegations to acts of dishonesty or commercial unreasonableness; and specific contractual duties."

—Idan Erez, Hoffer Adler

"That franchise agreements and development agreements are negotiable. You wouldn’t believe how some people, even incredibly sophisticated people, don’t take the time to hire competent franchise counsel before they sign franchise agreements and development agreements."

—Mark Dady, Dady & Gardner

"The choices for land control. It is critical that franchisors understand the pros and cons of taking on leases themselves, through affiliates or directly by franchisees and the various options available to them to maximize their interests and minimize their risks."

—Allan Dick, Sotos

"Mandatory mediation and arbitration provisions. Although on its face these seem obvious to the franchise attorney, when franchisees come to me with a material issue, they rarely realize that they have to jump through some hoops before they may reach resolution months down the road. I do find these mandatory clauses helpful to both parties, though, since you must exhaust all alternative means to amicably resolve matters before being forced to pop off and file."

—Kit Higgs, Kit Franchise Law

"Last September, NASAA issued a statement of policy regarding the use of franchisee questionnaires in franchise disclosure documents, effective January 1, 2023. Although this is not a rule adopted by the FTC, some states such as California and Maryland have issued opinions regarding the statement of policy, stating that they intend to follow it and implement comments to FDDs consistent with NASAA’s policy. Thus, franchisors should be aware of the statement of policy and consult with their legal advisers on whether any changes need to be made to their FDDs."

—Christina Fugate, Ice Miller

"That 23 items and a franchise agreement does not a good FDD make! We are seeing a lot of these ‘creation companies’ who promise to ‘turn you into a franchise’ and they are using poor-quality, outdated FDD templates and then getting them rubberstamped by outside attorneys—oftentimes attorneys who have never even met the franchisor client. The quality of the work product is appalling, and the results can be devastating for brands when they find out the bill of goods they’ve been sold. If brands are serious about franchising they should be on a first-name basis with their franchise attorney and preferably have them on speed dial, especially in their early years of learning the ins and outs of franchising and its laws/regulations."

—Drew Chalfant, Roda Chalfant Franchise Law

"Franchisees need to understand the impact of leasing when they decide to sell their business. For example, assignment clauses."

—Michelle Prager, Paris Ackerman