Illinois Franchise Lawyer
Illinois Franchise Lawyer
Starting or owning a franchisee is an exciting endeavor that allows business-minded individuals to grow companies using established processes, known products, and recognizable brand names. Franchisees are also allowed to use trademarks, proprietary knowledge, and leverage proven business practices instead of starting from nothing. As exciting as this can be, it is imperative that franchisees work with an experienced business lawyer who fully understands the details involved with franchise opportunities.
Motiva Business Law has helped countless franchises, just like you, remain aware of their rights and obligations, and get the most out of their opportunities. Our Firm will help write or understand the FDD and franchise agreement so you can make an informed decision before investing tens of thousands of dollars into a franchise. Our Firm also helps set up franchise systems so you can realize your vision. Our franchise lawyers are committed to listening to your goals and ensuring your business is a success.
We serve businesses in Oak Brook, Burr Ridge, Naperville, Hinsdale, Lombard, Addison, Downers Grove, Oak Park, Darien, Chicago, Lisle, Westmont, Willowbrook, Clarendon Hills, and the Chicagoland Area.
Motiva Business Law Offers
- Franchise Formation
- Franchise Agreement Reviews
- Legal Counsel Related to Franchise Matters
- Franchise Disclosure Documents (FDDs)
- Sub-Franchisor Agreements
- Area Development Agreements
- Multi-Unit Franchisees
- Franchise Acquisition
When is the Best Time to Work with Franchise Attorneys?
The best time to involve our franchise lawyers is when you receive the FDD (Franchise Disclosure Document). Our Firm likes to get involved early in the process so we have ample time to review and negotiate the documents before the franchisor’s deadline (if the franchisor has one). Once we are engaged, we can review documents such as:
- Franchise Agreements
- Franchise Disclosure Documents (FDD)
- Multi-Unit Franchise Agreements
- Area Development Franchise Agreements
- Sub-Franchisor Agreements
Benefits of Working with a Franchise Lawyer
You may be under the assumption that franchise agreements are non-negotiable, but that is a myth. Our Firm is here to help you understand legal jargon and franchise law. After we review your agreements, we can help you negotiate so the transaction better suits your long-term goals as a franchisee. Franchisees, like you, have many legal rights. We can help make sure a franchisor is complying with its duties to you. We are here to serve as your advocate and trusted legal resource.
Multi-Unit Franchise Lawyers
Opening one franchise is tough work, but buying and overseeing multiple franchises not only requires extensive business expertise, but also the right legal team. Motiva Business Law has worked closely with multi-unit franchise owners in both Illinois and Florida. Our Firm can help you navigate complex legal decisions, assist with reviewing key agreements, and ensure you have peace of mind. Our Firm understands that when you purchase multiple franchises, you have a big vision. Our goal is to make sure that vision has the legal foundation you need to continue to expand and scale your business.
Understanding Franchisee Exemptions
Franchisees who are more experienced have an exemption related to franchisor disclosure. This exemption applies to transactions with large franchisees where the franchisee (a) possesses a net worth of at least $5 million (as of July 1, 2020, this monetary threshold of $5 million had been increased to $6,165,000 by the FTC to account for inflation), and (b) the franchisee has been in business for at least 5 years.
There is also an exemption in place for large investments. This exemption is available to franchisors when the franchisor and potential franchisee have relatively equal bargaining power and business expertise. If the potential franchisee can afford a large investment, then it is more likely that the potential franchisee is experienced in business and has the resources to protect itself. In Illinois, the initial investment amount must be $1 million. Additionally, franchisors must submit certain information to the Attorney General to apply for the exemption.
If you have questions about the aforementioned exemptions, contact Motiva Business Law to schedule a consultation with our franchise attorney.
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Franchise FAQ
- Work under the franchisor’s brand and trademarks.
- Use the franchisor’s operational systems and manuals.
- Receive training and ongoing support.
- Operate in an exclusive territory.
- Benefit from the company’s marketing and advertising.
By franchising your brand, you will take the role of the franchisor, whereby you create a business that others can copy, but without becoming investors in your actual business. To become a franchisor, there are certain requirements such as creating an FDD and clear written business model, train franchisees, providing support, and collecting payments.
On the other side, as a franchisee, you will be required to make initial and ongoing payments to be able to operate under the franchisor’s brand and access its business model. You will also be required to follow the franchisor’s business model and requirements so the franchisor’s business and branding is consistent in all locations.
Technically, franchisees do “own” their franchisee business. However, even though they operate independently and own the assets they purchased, such as equipment and furniture, they do not own the overall brand. Franchisees also cannot deviate from the franchisor’s business model without the franchisor’s consent. However, a franchisee can sell his or her business with the franchisor’s consent.
A franchisee works under someone else’s brand, has to adhere to specific procedures, and does not own the entire revenue of assets of their business.
On the other hand, an independent owner works with their own brand, has full decision-making flexibility, and owns the whole business’s earnings and assets.
Yes, a franchise involves the parties entering a franchise agreement, which is a legally binding contract in which the franchisor, who owns the brand and business model, grants the right to a franchisee to use its business system trademarks for a specific duration in exchange for paying a fee and ongoing royalties.
- Fees: This includes the initial franchise fee and ongoing royalties and other fees.
- Territory: The area where the franchisee has the exclusive right to operate.
- Operations: Guidelines and standards for the operation of the franchise.
- Intellectual property: The use of trademarks and intellectual property.
- Support: The extent to which the franchisor will assist the franchisee.
- Termination and renewal: The conditions under which the parties can cancel or renew the agreement.
To find better terms for the franchise agreement, you will need the help of a franchise attorney who knows the typical fees charged by similar franchises and will negotiate terms that will ensure you generate profits and operate successfully.
To establish a franchise as a franchisor, the legal costs can cost from $60,000 upward, to create the whole system. The legal costs for a franchisee are closer to $3,000-$10,000 depending on how much the lawyer needs to do for the franchise, including establishing the right corporate entitity, negotiating with a franchisor, and how many disclosures and contracts are involved.
Whether you can negotiate a franchise agreement depends on how established a franchisor is, how much a franchisee can grow a franchise, and what terms are being negotiated. For example, negotiating franchise fees and anything related to the uniformity of the business is very difficult. Other terms related to management and legal miscellaneous clauses can be negotiated.
- Review the franchise agreement to assess the risks and profitability,
- Guide you during the franchising process,
- Negotiate the terms of the franchise agreement,
- Ensure regulatory compliance, and
- Write and negotiate other contracts, such as lease agreements.
When buying a franchise, it is crucial that an attorney reviews the franchise agreement and analyzes costs, the franchisor’s financials and liabilities, and your rights and responsibilities as a franchisee.
You can consult an accountant to review your financials and the franchisor’s. Also, interview other franchisees to learn about their satisfaction level and success.
- Guiding you along the franchising process, navigating the legal aspects of the agreement, and helping you make informed decisions.
- Review the FDD and franchise agreement to ensure your deal is profitable and has the most favorable terms. Also, a lawyer will help you understand the implications of the contract.
- Identify and minimize risks related to the transaction
- Draft, review, and negotiate other required contracts, such as lease agreements and employment agreements.
- Ensure you comply with the local, state, and federal franchise laws.
Whether a franchisee can own more than one franchise depends on the franchise agreement. Some franchise agreements restrict a franchisee from engaging in all other businesses, while other franchises only prevent the franchisee from owning competing businesses. However, the ideal and most profitable way to be a franchisee is to be a franchisee of more than one location. Franchisees do this by entering into multi-unit franchise agreements or area development agreements. Over time, a franchisee makes more money with less effort since the franchisee is just repeating the same business model over and over again.