Huck Bouma PC Attorneys At Law

Call 630-221-1755

Huck Bouma PC Attorneys At Law

630-221-1755

Creative And Strategic Legal Guidance

Legal Representation For Illinois Franchisees

If you are a franchisee or considering the purchase of a franchise in Illinois, make sure you understand your obligations, rights and responsibilities. Many franchisees have no previous experience with franchising and need the legal direction of experienced franchise and business lawyers. The attorneys in Huck Bouma Franchise Law Practice Group have over 30 years of experience in helping franchisees protect their interests.

Representing Franchisees

Do not invest in a franchise without the counsel of an experienced franchise attorney. In the case of franchise law, extensive experience is important. The Huck Bouma franchise attorneys can help franchisees with any of the following:

  • Review of Franchise Disclosure Documents
  • Review and negotiation of franchise agreements, including restrictive terms, noncompete clauses and territory terms
  • Lease review and negotiation
  • Review of ancillary agreements
  • Entity formation

If you are an existing franchisee, you will want to seek counsel and advice from our franchise lawyers relating to:

Owning a franchise is a significant investment of your resources and should be done with the support of experienced franchise attorneys. When you work with Huck Bouma Franchise Law Practice Group, knowledgeable attorneys scrutinize any restrictive economic terms, noncompete clauses, territory protections and potential consequences of your termination. This legal counsel and direction you need is provided prior to purchase so that you fully understand your rights and responsibilities.

Protections Under The Illinois Franchise Disclosure Act (IFDA)

Illinois is a franchise registration state, which means it requires franchisors to register their franchise  offering with the state. This process adds a layer of review of the Franchise Disclosure Document that does not exist under federal law alone and creates important safeguards for you.

A key part of the IFDA is the protection it offers against wrongful termination. The law prohibits a franchisor from ending your franchise agreement without “good cause.” This means they must have a valid and legally sound reason to do so such as a major breach of contract.

Furthermore, except for a few permitted exceptions, a franchisor cannot simply declare your business in default and terminate your agreement overnight. Under the IFDA, when a franchisor believes you have violated the franchise agreement, they must provide you with a written notice. After you receive this notice, you generally have up  to 30 days to “cure” or correct the issue.

The law also protects your long-term investment by guarding against unfair nonrenewal. This helps safeguard the business you worked hard to build, ensuring that your success does not make you an easy target for replacement.

Finally, the IFDA gives franchisees the right to bring an action in court against a franchisor or any person who offers, sells, terminates or fails to renew a franchise in violation of the IFDA for damages and/or rescission.

Critical Importance of Careful Review of the  Franchise Disclosure Document

The purpose of the  Franchise Disclosure Document (FDD) is to provide prospective franchisees with important information to make an informed decision about whether to invest in a franchise.  The FDD contains 23 different sections that detail the franchisor’s business and financial history and its obligations to the franchisees, and information on the franchisee’s obligations under the Franchise Agreement. Many franchisees rush through this step and miss critical information and possible red flags.  Best practice is for prospective franchisees to engage franchise legal counsel to review the FDD and Franchise Agreement with them.  Legal counsel can help spot possible red flags and areas for further investigation and will help prospective franchisees understand their obligations under the Franchise Agreement.   

Here are some examples of key areas for  review of the FDD:

  • Financial performance representations (Item 19): Franchisors do not have to provide information about how much money other franchisees make. If they choose to do so, they must follow certain rules in how the information is presented in the FDD.  While this information can be very helpful to you in projecting your potential income and assessing the system’s overall financial health, it also must be carefully scrutinized.  If the franchisor has chosen not to present data on franchisee financial performance, questions may arise as to why they have made this decision.  It can also make  projecting your potential income much harder.
  • Additional fees (Item 6):  In addition to the initial franchise fee you will be obligated to pay other fees during the term of the franchise.  Look closely for all mandatory ongoing fees besides the expected royalties,  such as  marketing contributions, local marketing requirements, and technology fees. These ongoing costs directly impact your profitability and must be carefully evaluated.  This item also covers one-time fees that you may be required to pay during the franchise term or at the end of the franchise, including transfer fees and renewal fees.
  • Initial Investment (Item 7):  The franchisor is required in this Item to provide an estimate of what it will typically cost a new franchisee to establish the franchise business and operate for an initial period.  This is key information for you to review and to use in preparing your own business plan and determining that you have sufficient funds to cover the initial costs and the operational costs until you begin making profit. 
  • Strict sourcing and vendor requirements (Item 8): Franchisors generally impose some purchasing restrictions and requirements in order  to maintain brand consistency, but some agreements take this too far. They may require you to buy all your supplies, inventory or equipment from the franchisor or a specific supplier they choose. This can prevent you from finding better prices elsewhere and may allow the franchisor to profit unfairly from your purchases.  Disclosures in this Item on how the franchisor is benefiting financially from your purchases helps you to assess the purchasing restrictions. 

These are just a few examples of potential issues hidden within this legal document. A comprehensive review of the Franchise Disclosure Document and Franchise Agreement with the assistance of a knowledgeable franchise attorney is crucial in making informed decisions for your investment.  

Protecting The Best Interests Of Illinois Franchisees

Whether you are an existing franchisee or considering the purchase of a franchise, you always want to be aware of your legal rights and take action to protect yourself as a franchisee. In your franchise agreement, you will want to be aware of your obligations and certain restrictive terms in your contract and other clauses that will affect your rights and the operation of your business. Allow Huck Bouma‘s franchise attorneys to assist you in reviewing your Franchise Disclosure Document and your franchise agreement. You will also want to understand your rights under the Illinois Franchise Disclosure Act.

From DuPage County and surrounding Chicago suburbs, the Huck Bouma franchise lawyers are ready to help you take the right steps to protect your best interests. You can call us at 630-221-1755 or email us through the online contact form.