Expert Legal Services

It is critical to the long-term success of the franchise that all aspects of the operation be clearly identified for inclusion in the legal documents. Our development system ensures that the legal, operational, marketing, sales, and financial aspects of our clients’ concepts are formulated in both the disclosure document and in specific provisions of the franchise agreement. Our legal services are provided individually or as part of a development program. Many of the services listed below are inclusive of our Franchise Essentials Program.

Legal and compliance services include:

Preparation of the FTC Disclosure Document and Franchise Agreement

There are 23 “items” required to be disclosed in the FTC Disclosure Document concerning the franchise company and provisions contained in the Franchise Agreement.  The system and processes (including questionnaires and interviews) used by FranSource when developing and drafting the Disclosure and Agreement ensure that all aspects of the client’s system are fully identified and properly disclosed. FranSource fully advises the client concerning specific provisions of the franchise relationship.

The Franchise Agreement and Disclosure Document are prepared in conformance with FTC guidelines. This enables the client to begin selling franchises in 35* states upon completion of the documents.  The remaining fifteen states have registration requirements in addition to those dictated by the FTC that must be met in order to solicit and sell franchises (see “Registration of the Franchise” in the Optional Services section below). The Disclosure Document is drafted in compliance with the revised FTC Franchise Rule (Jan. 2007). All franchise companies are required to follow the new Rule effective July 1, 2008. However, Franchisors are permitted to use the new Disclosure format commencing July 1, 2007.

Preparation of Exhibits to the Disclosure Document and Franchise Agreement

The following Exhibits to the Disclosure and Agreement are prepared as required:

• Deposit Agreement
• Non-Competition Agreement
• Site Selection Addendum
• Franchisee Compliance Certification
• Lease Assignment Agreement 
• List of State Administrators
• List of State Agents
• Telephone Number Assignment Agreement
• List of Franchisees and Area Developers
• Operation Manual Table of Contents
• State Specific Addendum to the Disclosure Document
• State Specific Addendum to the Franchise Agreement

The State Specific Addendum to the Disclosure Document and Franchise Agreement are prepared by FranSource as part of the legal development process to ensure the client’s compliance with individual state franchise laws when registering in the 15 registration states. The State Specific Addendum address the individual state franchise laws and regulations. 

In addition to the Exhibits listed above, certain financial disclosure requirements must be met by the franchisor. A newly formed franchise entity is permitted to provide an audited opening balance sheet and non-audited financial statements for the first year of the franchise operation. Please contact FranSource for additional information.

Preparation of the Area Development Agreement

An Area Developer program permits the company to sell multiple franchises to a single franchise for development over a prescribed time period.  A percentage of the franchise fee for each franchise to be opened is typically paid in the form of a Development Fee upon execution of the ADA (and is normally non-refundable). The Area Development Agreement (“ADA") is prepared as an exhibit to the Disclosure Document. In doing so, disclosure requirements are met and multiple-unit opportunities are immediately available to the client. FranSource advises the client concerning the appropriate structure, requirements, and policies for the Area Developer program.

Preparation of a Nondisclosure for use during the sales process

FranSource prepares a nondisclosure document for use during the sales process to help ensure the protection of the client’s confidential and proprietary information. This form is typically provided to prospective franchisees early in the sales process to enable the company to share information that may be more confidential in nature.

Filing Required State Exemptions

Of the 35 “non-registration states,” five states require franchise companies to complete an “exemption filing” prior to commencing the sale of franchises in their state.  FranSource completes the required applications for the five states. 

The states include:

• Kentucky
• Utah
• Texas
• Florida
• Nebraska

Registration State Filings

Upon completion of the Franchise legal documents, FranSource prepares the required documentation for filing the Company’s franchise offering in the states selected by the Client. FranSource responds to all inquiries from the states’ examiners related to the Company’s registration.

The 15 registration states include:

Cooperative Advertising Agreements

"Cooperative Advertising Agreements" are normally executed between franchisees when the opportunity exists to pool resources to promote multiple franchises within a specific geographic area. When appropriate for the client's operation, FranSource drafts an agreement that ensures the advertising co-op relationship is properly structured and implemented between participating franchisees.

Supplier and Vendor Agreements

It is critical that the relationship between the client and its vendors and suppliers be properly structured and protected from competitors.  When required, FranSource assists in the preparation of supplier agreements to protect the company’s relationships with its vendors and suppliers.

Additional advisement is provided concerning: