Franchise Law: Franchising Law & Franchise Law Firms

Equal Protection Under the Law
Laws are generally in place within a society to provide protection for the citizenry.  There are many areas of law, with criminal and civil as the two main categories.  However, there exist many subdivisions and specialties within each class, and legal experts in one discipline may not know a great deal about some other discipline.  Franchise law has evolved over the years to protect franchise buyers and ensure that rules and regulations throughout the industry are fair and open.  A franchise law firm generally finds its clients within two distinct groups – individuals who are interested in buying a franchise, and companies that wish to start a franchise operation.  There is even an area known as franchise investment law, where some states require franchises to be registered before they can be bought or sold.  A competent franchise law attorney is a valuable commodity for any party involved in franchising.  He or she should be well informed on new franchise law developments as well as existing case law.

Franchise Law Firms
Even the most cursory Web search will turn up hundreds of law firms that specialize in business franchise law.  Some even boast staff attorneys who have worked for the Federal Trade Commission (FTC), the agency responsible for overseeing the sale and operation of franchising within the United States.  Franchise law is complex and ever changing, which means that a reputable franchise attorney will keep up on all new developments and cases.  Some franchise law firms represent only franchisees or dealers.  They generally assist prospective buyers in navigating the confusing language of a franchise agreement, and also represent existing franchisees in litigation against their franchisors.  Other firms represent the other side exclusively, helping them to draw up the proper legal documents to satisfy government franchise law, as well as litigating against franchisees that have allegedly violated the terms of their franchise agreement.  No matter which side you fall on, it is important to interview several firms – and possibly a few attorneys within that firm – before deciding whom you should hire.

Five Important Recent Franchise Law Rulings
Within the past several years, a number of important franchise law cases have broken new ground, helped clarify murky case law, or else reinforced existing law.  Here is a brief summary of five recent landmark decisions, although it should be noted that some rulings only apply to a specific state or court circuit:

  • Randall v. Lady of America – Disclaimers that are part of a franchise’s marketing documents do not allow a franchisor to make false or misleading claims regarding the potential revenue a franchise could generate for its owners.
  • Nagrampa v. MailCoup – Where franchise agreements contain a clause that requires both parties to submit to arbitration in order to resolve a dispute, the arbitrator is not allowed to rule on the validity of the clause itself; that right is reserved for the court.
  • Bray v. QFA Royalties – A franchisor must exhibit some level of “reasonableness of judgment,” even when exercising a clause that is part of a franchise agreement.  If contested, any element of such an agreement may be required to pass a test to verify that it is a reasonable expectation.
  • Radisson v. Majestic Towers – A franchisee whose license has been terminated for violating its franchise agreement is liable for liquidated damages (in this case, an amount equal to two year’s worth of royalties), even though finding a new buyer for that franchise may not take the entire two years to accomplish.
  • Century Pacific v. Hilton – Franchisors have the right to sell their parent company at any time, and franchisees should take that possible situation into account before signing on as a small business owner.

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One Response to “Franchise Law: Franchising Law & Franchise Law Firms”

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