Let’s be honest – signing a franchise agreement is agreeing to a legal commitment that may last 10+ years and may run you hundreds of thousands of dollars. Most people just browse through those 50+ pages of thick legalese, sign their name on the line, and hope for the best. Big mistake. This is exactly why a franchise contract review attorney is worth their weight in gold.
Behind that “standard contract” language lurks provisions that could strangle your business before it even gets off the ground. This isn’t about being paranoid – it’s about being prepared. A qualified franchise contract review attorney can spot these issues immediately. Here’s what attorneys who specialize in franchise law actually look for when reviewing these agreements.
1. Territory Rights: Your Protection Against Cannibalization
Nobody wants to invest their life savings into a franchise only to have another location open up two blocks away. Yet franchise agreements can contain sneaky loopholes that make territorial “protection” nearly worthless.
Sharp attorneys dig into territory clauses looking for these hidden traps:
- Geographic boundaries described vaguely as “the area surrounding 123 Main Street” instead of precise mile radiuses or zip codes
- Those irritating “exceptions” allowing the franchisor to sell through airports, military bases, college campuses, or online – often directly competing with your location
- Language permitting the franchisor to open their “other brands” right next door (imagine investing in a Pizza Hut only to have Taco Bell – owned by the same parent company – move in next door)
- Relocation requirements forcing you to move your established business at your expense if the franchisor decides they don’t like your location anymore
2. The Financial Quicksand Beyond Royalties
Everyone focuses on the franchise fee and royalty percentage. Meanwhile, the real money drain often hides in obscure contract sections that franchisors rarely highlight during the sales pitch.
Seasoned franchise attorneys immediately flip to sections covering:
- Marketing fund contributions (typically 2-4% of gross sales) that you pay regardless of whether any marketing actually benefits your location
- Technology fees for proprietary systems you’re required to use and update – one major franchise recently forced all locations to implement a new $30,000 POS system
- Mandatory store remodels every 5-7 years that can cost upwards of $250,000 with zero financial assistance
- Required purchases from “approved vendors” who mysteriously charge 15-30% above market rates
- Transfer fees that can run $15,000-$50,000 just for the privilege of selling the business you built
- Disguised fees like “training” for new managers ($3,000-$5,000 each) or “site selection assistance” ($10,000+)
3. Renewal Terms: The Ticking Time Bomb
Most franchise agreements run 10 years. What happens when that decade ends? You’d be shocked how many business owners never really think about this until year 9, when they suddenly realize they have virtually no leverage.
Good legal review examines:
- Whether renewal is even guaranteed (hint: it’s often not)
- Requirements to sign the “then-current” franchise agreement – which might contain radically different terms than what you originally agreed to
- Renewal fees that effectively force you to “buy your business” all over again
- Provisions requiring complete remodeling or equipment replacement as a condition of renewal
- Right of first refusal clauses that let the franchisor swoop in and buy your profitable business at a discount when you try to sell
- Post-termination non-competes that can prevent you from working in your field for 2-3 years if you don’t renew
4. Performance Requirements & Default Triggers
Franchise agreements typically give franchisors multiple ways to declare you in default – some reasonable, some downright predatory. This section often contains the most one-sided provisions in the entire agreement.
Lawyers scrutinize:
- Sales quotas that increase yearly regardless of market conditions
- Quality metrics based on subjective evaluations from corporate inspectors who visit once a quarter
- Customer satisfaction scores where anything less than “excellent” is considered failing
- Cure periods as short as 24 hours for certain violations
- Default provisions allowing termination after just 2-3 violations in a 12-month period, even if they’ve been cured
- Cross-default language meaning problems at one location can jeopardize all your other franchise locations
5. Dispute Resolution: The Home Court Advantage
Watch out for:
- Forced mediation and arbitration provisions that keep you from having your day in court
- Venue provisions that mandate you to travel to the franchisor’s home state for any court action – try contesting a California-based business when you reside in Maine
- Language waiving your right to jury trials
- Prohibitions against joining forces with other franchisees in class actions
- Requirements to pay the franchisor’s legal fees even if you win the dispute
- Shortened statutes of limitations giving you just 6-12 months to bring claims
Bottom Line
A thorough legal review of your franchise agreement isn’t just a box to They understand exactly what they’re signing, what risks they’re taking, and what rights they’re giving up.
In the world of franchising, what you don’t know absolutely can hurt you. Get informed, get protected, and then go build that business with confidence.
