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Sneaky Franchise Lawyer Tricks Part III

This is the third Sneaky Franchise Lawyer trick, and I promise you that it is a doozy!

The first Sneaky Franchise Lawyer Trick was the general observation that a lot of good questions may not be answered in the UFOC or FDD.

"So what is the significance of good questions that are not the in FDD or UFOC?

Well, the usual integration/waiver clause in a franchise agreement will block you from being able to rely upon the answers you received to questions that were not in the FDD or UFOC.

You simply cannot rely upon information not provided to you in the UFOC unless your attorney amends the standard franchise agreement."

You ask a bunch of good questions, get some answers, make your decision upon these answers -later you find out that you signed an agreement that said since the answers to these questions were not in the UFOC or FDD, then you are deemed at law not to have relied upon them. Oops!

The secnd sneaky franchise lawyer trick had to do with representations about earnings.

Everyone wants to know how much money you can make buying a franchise. This information, if disclosed, is in Item 19 in the UFOC or FDD.

But, if you find material information outside of the franchise disclosure document, you generally cannot rely upon it.

The current head of the FTC tripped up on this trick:

"If I were buying a franchise, regardless of whether Item 19 data [financial information] were provided, I would obtain information about sales, costs, and profits by meeting and talking at length with a number of current franchisees, and would encourage all prospective franchisees to do that."

The problem with this is that when you sign the franchise agreement, you "agree" that you haven't relied upon anything not in the UFOC or FDD.

So all your hard work would be for naught.

The third trick is even more devious. You sign a franchise agreement, which prohibits you from having a jury trial, unless applicable law prevents you from waiving your constitutional right to a jury trial. And your state law does prevents you from waiving a jury trial.

So you are golden, eh? Jury trial is a given.

Oops no.

As some MBE franchisees found out. In US Federal Court, the right to a trial is governed by Federal and not State law. So in the franchise contract which you signed, which waived your right to a jury trial unless applicable law prevented the waiver, the words "applicable law" referred to federal and not state law.

Now that is tricky!

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Full post as published by Misleading Advertising Law on July 21, 2008 (boomark / email).