How to Evaluate a FDD Franchise Disclosure Document - Cost To Evaluate a FDD
Investing in FDD EVALUATOR (sm) before signing long-term franchise agreements, spending large sums of money up-front, and an even greater amount during the course of a 10-20 year franchise relationship, makes good business sense.
Why Hiring A Franchise Attorney To Review the FDD Makes Absolute SenseWith virtually all you assets on the line, and ten to twenty-year legal and financial commitments involving the franchise relationship, commercial real estate leases, etc., a franchise investment is the most important legal, financial and emotional decision most people ever make. Don't be swayed by smooth-talking franchise sales people who lull many into an emotional state where decisions of a lifetime are made on the basis of warm fuzzy feelings instead of objectivity, logic and circumspection.
Yes, The Franchise Contract Is NegotiableMy three decades of experience in reviewing over 500 Franchise Disclosure Documents shows a significant amount of FDD negotiation is possible, especially when unfair provisions (known as franchise boilerplate that bites) are present in the contract or the contract is inconsistent with the custom and practice within the franchise industry. Especially these days, when it comes to franchise agreements, you don't get what you deserve or even what's fair - you only get what you negotiate. The window for negotiation slams shut the moment the contract is signed. Don't miss out on this critical opportunity. If you are trying to negotiate the McDonalds franchise agreement - forget about it - they don't negotiate. On the other hand, their 15-page franchise agreement doesn't contain boilerplate that bites. If you're dealing with a franchise company of less standing than McDonalds, then negotiate. Especially in today's economic climate when franchise companies are very anxious to sell a franchise.
Cost To Review a FDD Franchise Disclosure DocumentFranchise lawyers attorneys usually charge a "retainer" of $4,000 to $8,000 applied against hourly rates of $300 to $600 per hour to review the FDD, etc. Retainers invariably mean pay this now, and more later. Franchise Foundations has an FDD Evaluator service. For a flat contract rate the disclosures in the FDD and major franchise contract provisions are reviewed by a franchise attorney MBA, and a detailed written report and analysis is provided to give you an overall thumbs up or down on the franchise investment, see if it's something worth pursuing further, as well as indicate major red flags and critical provisions in the contract you definitely want to negotiate or consider further.
Franchise Relationships - Plan An Exit StrategyFranchise relationships are easy to enter, but usually very difficult to break - unless you adopt a proactive strategy of planning an exit strategy. What happens if things don't work out as expected? Don't get left holding the bag on long-term commercial real estate leases, etc. Plan an exist strategy before investing in any franchise. If you try to plan one after you are in, it's usually too little, too late.