contact an attorney
When you are buying an existing franchise business, you have several issues about which to be concerned. You will need to make sure that this is the right franchise system in which you should invest. You will need to form an entity to have title to the franchise and assets you will be acquiring and you will need to evaluate the actual business you will be acquiring from the current franchisee/seller. Read more »
When you are buying an existing franchise business, you have several issues about which to be concerned. You will need to make sure that this is the right franchise system in which you should invest. You will need to form an entity to have title to the franchise and assets you will be acquiring and you will need to evaluate the actual business you will be acquiring from the current franchisee/seller.
In evaluating if this is the right franchise system in which to invest, you will need to do all of the validation/due diligence that you should do when investing in any franchise. You should speak to as many existing franchisees around the country as you have time to call to determine if they recommend the franchise. I typically recommend at least 10% of the existing franchisees (more if it is small franchise system and less if there are hundreds or thousands of franchisees). The existing franchisees are your best resource. After you have spoken with the franchisees of the franchise system, you should retain experienced franchisee counsel, like us, to review the documents and advise you on them. Read more »
Many times franchisee consultants or brokers are concerned to recommend that their candidates have an attorney review of the franchise documents. I would strongly recommend otherwise. An attorney review not only is critical to a prospective franchisee, but it is also very important to protect the consultant or broker.
By recommending that a candidate have the franchise documents reviewed by an experienced franchisee attorney like me or my firm, a franchise consultant or broker is protecting him or herself from potential liability if the franchise he or she recommended is not successful or otherwise does not work out for the franchisee. By just sending an introductory email introducing me to the candidate, the franchisee consultant or broker has avoided being the last person to "touch" the franchise that the candidate or prospective franchisee considers. This means that a disgruntled franchisee will not blame the consultant or broker, or if he or she does, then the consultant or broker can always say that he/she recommended that the candidate retain an attorney. Read more »
Buying an existing franchise has some key advantages over buying an existing main street business. Like all business decisions, the short term and long term goals of the purchaser should determine the right fit for a business to buy. If the buyer’s goal is lifestyle, control (compared to a job) and predictable cash flow than a franchise has some distinct advantages. However, there are also some hidden cost and considerations that are unique to franchise transfers. Read more »
The National Labor Relations Board (NLRB) Office of General Counsel authorized complaints filed by employees of McDonalds franchisees could also be held against McDonalds USA, LLC, the franchisor. This has tremendous significance for all franchisors and could have far reaching consequences in the future for franchisors nationwide. NLRB held that McDonalds corporate is a "joint employer" with its franchisees. If this decision stands up, franchisors, and McDonalds in particular, may be held liable for all the infractions of its franchisees, possibly extending to joint liability for other types of actions by its franchisees.
McDonalds and the International Franchise Association (IFA) plan to appeal any rulings from the NLRB that enforce this posture. Clearly, if pursued, this ruling will open the door for many types of decisions against a franchisor for the actions of its franchisees. Read more »