Franchise Agreements have evolved over the years into extremely one-sided agreements in favor of the franchisor, making it even more essential that prospective and actual franchisees take the time to understand the structures, risks, and obligations of such agreements.

Below are two key texts that can help franchisees be prepared for the process and have more productive conversations with their legal counsel when reviewing agreements:

  1. Colonel Sanders and the American Dream (University of Texas Press)written by the late, great food writer and James Beard Award winner Josh Ozersky. Not just a biography of the founder of Kentucky Fried Chicken, but a textbook on the pros and cons of franchising. "KFC," as it is now known, is one of the most successful and controversial franchises in the history of franchising. Despite minting money for its franchisees and being the second most popular franchise in the world, the Colonel himself and many of the earliest and largest KFC franchisees have initiated litigation against their franchisor in connection with the marketing and branding of the KFC system.

  2. The Franchise Disclosure Document ("FDD"). Fortunately, both federal and state governments have legally mandated that franchisors provide full disclosure to their prospective franchisees before entering into a legally binding Franchise Agreement. The FDD contains 23 required items intended to inform the prospective franchisee of the potential risks and anticipated costs of entry into the Franchise Agreement. While perhaps not as entertaining as the Colonel Sanders story, the review of the FDD is vital to making an investment decision with respect to entering into any franchise agreement.

Pryor Cashman can assist a prospective franchisee in taking a "deep dive" into the FDD and identifying the risks and expenses that the franchisee will need to be aware of. Based on the FDD review, our franchise attorneys can then help negotiate the Franchise Agreement on behalf of the franchisee with modifications that the franchisee may request.

If you are considering investing in and entering into a Franchise Agreement in any industry, please contact Restaurant, Food + Beverage Practice Co-chair Richard Frazer (who was recently named to the 2024 Best Lawyers in America list for Franchise Law) at Pryor Cashman to discuss the FDD and Franchise Agreement. Rich has successfully negotiated amendments to proposed and existing Franchise Agreements that can afford greater protection to franchisees. Using the constitutionally protected rights of assembly and association, he has formed franchise associations that provide franchisees a louder voice in discussions with their franchisor using the "strength in numbers" of collective negotiation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.