Beware Franchise Lies, Expert Warns

Franchise contracts can be very complicated and often contain legalese specifically disguised to thwart the buyer’s full understanding of the agreement. Prospective franchisees faced with signing these kinds …

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Franchise contracts can be very complicated and often contain legalese specifically disguised to thwart the buyer’s full understanding of the agreement. Prospective franchisees faced with signing these kinds of documents should do with great care and never without the advice of an attorney. Oftentimes, unfavorable clauses are buried deep in the contract or are contained in “questionnaires” that must also be signed but don’t appear to be part of the larger contract. Franchise attorneys warn to watch out for these tricks and to hire a professional before signing documents. For more on this continue reading the following article from Blue MauMau.

Almost every franchisee, when buying a franchise, is asked to sign a document containing false statements–in order to be "awarded" a franchise.  No franchise or other business opportunity is worth signing something false to get it.

Any relationship in life that begins with a lie is doomed to failure.  You know from the beginning that you cannot trust the other person.  The whole foundation is false. Franchisors love to refer to their franchisees as "partners".  The essence of a partnership is a fiduciary duty of loyalty and honesty between partners.  If you agree to compromise that loyalty and honesty right at the beginning it will cost you dearly.

The lies you are asked to agree to are sometimes buried in the fine print on page 33 of the franchise agreement.  Most often, they are in a separate "questionnaire" you are told you must sign.  The first few questions seem (and often are) innocuous.  However, the questionnaire quickly moves on to ask you to agree that you have not received any financial information outside of the formal documents (Franchise Disclosure Document and franchise agreement).  In many cases, they are carefully written so that you are agreeing that you did not even rely on the Franchise Disclosure Document.

Before you sign such agreements or answer any of those questions, it is critical that you understand the questions and answer them truthfully–even if it means the franchisor withdraws their "offer".  You can be sure that the questions are carefully written in "legalese" that is disguised as "plain English"–in other words, it has legal meanings that may not be apparent from the words used.  You should not go it alone.  Even if you are otherwise determined to make the biggest investment of your life without consulting a lawyer, you should consult an experienced franchisee lawyer before signing any such "questionnaire".  Remember, the more innocuous the document appears to be, the worse it often is for you.

Many franchise sales consultants will tell you that you have to sign the false statements "in order to get the franchise".  If that is the case, you should fire the consultant and walk away from the franchise.  Don’t compromise your honesty and ethics to get into a business under false pretenses.  If a statement you are asked to sign is not true, you should not sign it.  If that means the franchisor has a harder time selling franchises, perhaps it will change the franchisor’s way of doing business.  Meanwhile, you can get on with your life–in a different business venture that you can enter into without having to compromise your integrity.

This article was republished with permission from Blue MauMau.

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