Franchise contracts.
They are written by the franchisor for the franchisor.

What franchise law actually covers

Franchise law sits at the intersection of contract law, federal regulation (FTC Franchise Rule), and a patchwork of state franchise statutes. It applies to relationships where a franchisor licenses a brand and a system to a franchisee in exchange for fees and ongoing payments. Common franchised businesses include restaurants, hotels, fitness studios, home services, car care, retail, education, and senior care.

The major work that franchise lawyers do:

• FDD (Franchise Disclosure Document) review and negotiation for prospective franchisees
• FDD preparation and registration for franchisors expanding into franchise sales
• Franchise agreement negotiation — territory, royalty, term, transfer, post-termination covenants, dispute resolution
• Encroachment and territory disputes — when the franchisor opens a competing location too close to yours
• Termination defense — fighting a notice of default and termination
• Franchise misrepresentation claims — fraud, financial performance representations, omitted disclosures
• Resales and transfers — exiting your franchise to a buyer with franchisor consent
• Franchisee association formation and class actions against franchisors
• Multi-unit and area development agreements
• Joint employer and labor claims across the franchisor-franchisee line
• Trademark, system, and quality control disputes

The Franchise Disclosure Document — read it carefully

Every franchisor that sells franchises in the US must give prospective franchisees a Franchise Disclosure Document (FDD) with 23 specific items, at least 14 calendar days before any agreement is signed or money changes hands. The 23 items are highly informative — but only if you read and analyze them before you fall in love with the brand. The most consequential items:

• Item 1 — the franchisor and its parents, predecessors, and affiliates
• Item 3 — the franchisor's litigation history (lawsuits with current and former franchisees)
• Item 4 — bankruptcy disclosures
• Item 5 and 6 — initial fees and ongoing fees
• Item 7 — total estimated initial investment
• Item 8 — restrictions on sources of products and services (including required and approved suppliers, supplier rebates back to the franchisor)
• Item 9 — your obligations as a franchisee
• Item 11 — franchisor obligations (training, marketing, supply chain support)
• Item 12 — territory protection (or lack of it)
• Item 17 — renewal, termination, transfer, and dispute resolution
• Item 19 — financial performance representations (if any). Many franchisors omit this entirely.
• Item 20 — number of outlets, including transfers, terminations, and non-renewals (the most reliable signal of franchisee satisfaction)
• Item 21 — financial statements of the franchisor
• Exhibits — the actual Franchise Agreement and all related contracts you will sign

Item 20 is where careful prospective franchisees spend significant time. A high rate of terminations and transfers in mature markets is a red flag. Item 3 is similarly revealing — recurring litigation between the franchisor and its franchisees often signals systemic problems with the relationship.

State franchise laws — registration and relationship statutes

The federal FTC Franchise Rule sets the minimum disclosure floor. Many states add their own rules. Two categories:

• Registration states — California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, Wisconsin — require franchisors to register their FDDs with the state before selling franchises to residents. Several other states (filing states) require notice filings.
• Relationship states — Arkansas, California, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, Rhode Island, South Dakota, Virginia, Washington, Wisconsin, and several others — regulate the post-sale franchise relationship, including good cause for termination, opportunity to cure defaults, prior notice, and post-termination obligations.

State franchise laws often override contractual provisions. A franchise agreement that allows termination "for any reason" cannot be enforced that way against a franchisee in a state that requires good cause. Forum selection and choice of law clauses are similarly limited in many states.

Common disputes between franchisees and franchisors

Termination disputes

Franchisors terminate for cited defaults — failure to pay royalties, failure to meet quality standards, failure to remodel, abandonment, criminal conduct, and similar. Many state relationship laws require "good cause" and notice and an opportunity to cure (typically 30 to 90 days). Common defenses to termination include: the cited default did not occur or has been cured, the franchisor waived enforcement, the franchisor breached first, the cure period was not honored, and procedural defects in the notice.

Encroachment

The franchise agreement may give you exclusive territory — or it may not. Franchisors increasingly retain rights to open additional locations, sell the same brand through alternative channels (delivery aggregators, supermarkets, kiosks), or grant other franchisees overlapping territories. When sales at an existing location decline because of an encroaching new location or alternative channel, you may have a contract claim depending on the specific language and the implied covenant of good faith and fair dealing.

Misrepresentation and fraud

Franchisors are not allowed to make financial performance representations outside the FDD. Salespeople sometimes do anyway, in person, in marketing decks, and in informal communications. If a franchisee was induced to buy with off-FDD financial promises, the franchisee may have a fraud or state-law misrepresentation claim. The FDD's integration clauses and disclaimers are not always enforceable — many courts allow extrinsic evidence to support fraud-in-the-inducement claims.

Required suppliers and "rebates"

Many franchise systems require franchisees to buy from approved suppliers. The franchisor often receives rebates from those suppliers — disclosed in Item 8 of the FDD. Disputes arise when supply costs are above market and the franchisor's rebate is the reason. Antitrust and breach of fiduciary duty theories sometimes apply.

Renewal and transfer disputes

When the term of your franchise agreement expires, the franchisor may require you to sign the current FDD (often less favorable than the one you signed years ago), pay a renewal fee, remodel the location, and execute a release. State relationship laws sometimes limit how much the franchisor can change the deal at renewal. Transfers (selling your franchise to a buyer) require franchisor consent under almost every franchise agreement, with the franchisor often having the right of first refusal and the right to charge transfer fees.

Post-termination covenants

Most franchise agreements include non-compete, non-solicitation, and non-disclosure covenants that survive termination — typically two years and within a defined geographic radius. Enforceability varies dramatically by state. California is famously hostile to non-competes. Several other states have recently passed restrictions. A franchisee facing a non-compete after termination needs counsel familiar with both franchise law and the law of restrictive covenants in the relevant state.

Joint employer and labor exposure across the franchise line

One of the major regulatory battles of the last decade has been whether franchisors can be considered "joint employers" of their franchisees' employees, with full responsibility for wage and hour compliance, union-organizing obligations, and discrimination liability. The standard has shifted between the National Labor Relations Board, the Department of Labor, and the courts. Franchise systems and their counsel design operations carefully to manage this risk; franchisees and their counsel must understand the implications for their own liability.

Group representation and franchisee associations

Independent franchisee associations are common in mature systems, especially when the franchisor-franchisee relationship is troubled. Counsel can help organize an independent association, negotiate as a group, and, when the relationship genuinely cannot be repaired, prosecute class actions or coordinated arbitrations. Most franchise agreements contain class action waivers and mandatory arbitration; their enforceability has been the subject of substantial recent litigation.

If you are thinking about buying a franchise

The single highest-leverage thing you can do before buying a franchise is hire a franchise lawyer to review the FDD and negotiate the franchise agreement, then call ten current and ten former franchisees from Item 20 with prepared questions. Together this work usually costs less than 1% of your initial investment and can save you the entire investment if it surfaces a deal-breaking issue. Most prospective franchisees skip this step entirely. Most franchisees who skip it later wish they had not.

What does a franchise attorney actually cost?

FDD reviews are the most cost-effective franchise legal work — a $2,500 to $7,500 investment before signing prevents most of the problems that produce $50,000+ litigation fees later. Most franchise litigation is hourly. Some plaintiff-side franchisee class actions are taken on contingency. Franchisor counsel work — FDD updates, state registrations, and ongoing compliance — is generally hourly or fixed-fee on an annual program basis.

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