Tea Franchise Termination Found to be in Bad Faith

Jun 27, 2017 - Blog by |

The High Court in Kuala Lumpur, in refusing to prohibit a former franchisee from operating independently after a termination, caused more damage to the Franchisor (Chatime Fusion Tea House) than a horde of Helopeltes. The Judge ruled that the Franchisor’s termination was in bad faith and that an injunction preventing the Franchisee from operating would “cause great injustice.” The Franchisee in the case was so angry that he filed a police report regarding the termination.  Too funny. The Goldstein Law Firm has recently been successful in seven straight injunctive cases even though these types of emergency actions are the most difficult to win for franchisees.  http://www.freemalaysiatoday.com/category/nation/2017/05/29/court-dismisses-chatimes-bid-for-injunction-against-ex-franchise-holder/      

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Jeffrey M. Goldstein Named Among Esteemed Lawyers of America®

Jun 26, 2017 - Blog by |

The Goldstein Law Firm is pleased to announce that founding attorney Jeffrey M. Goldstein has been named among the Esteemed Lawyers of America®. This is the third time this year Mr. Goldstein and the firm have been awarded for their achievements and client service, following the firm’s recognition as Best Franchise Disputes Law Firm 2017 – USA by Acquisition International and Franchise Law Firm of the Year in the 2017 Finance Monthly Law Awards. Esteemed Lawyers of America® (ELOA) is an organization whose mission is, “to recognize the most respected lawyers in the country.” It seeks to help individuals and businesses find quality legal representation by offering a list of attorneys who are both (i) recommended by their peers, and (ii) qualified for recognition based upon their experience, commitment to client service and ethical standards. As described by the organization: “ELOA was established to honor those attorneys who are the most respected and esteemed by their peers throughout the legal community, and to help consumers identify them. . . . The best attorneys are being replaced by better marketers[,] and consumers don’t often know who the finest lawyers are anymore. By identifying the top lawyers as determined by the people who know them best – other lawyers – and educating the public as to who they are, Esteemed Lawyers of America® aims to change that.” Selection Criteria for Esteemed Lawyers of America® Membership in Esteemed Lawyers of America® is conditioned upon successful completion of a two-stage application process. The first […]

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Goldstein Law Firm Honored as Law Awards 2017’s Franchise Law Firm of the Year

May 19, 2017 - Blog by |

We are proud to announce that the Goldstein Law Firm was recently named “Franchise Law Firm of the Year” in the 2017 edition of Finance Monthly’s Law Awards. According to a press release from Finance Monthly announcing this year’s award winners: “Every year[,] the Finance Monthly Law Awards recognise and celebrate law firms and legal professionals from all over the world who, over the past twelve months, have consistently excelled in all aspects of their work and set new standards of client service.” The nomination and review process for Finance Monthly’s Law Awards involves months of work by a “diligent research team and dedicated judging panel,” who are tasked with producing a list of winners that represents, “some of the most successful and trusted legal professionals and law firms from across the globe.” “[A] franchise law firm dedicated to you, the franchisee.” Law firms honored as recipients of the Law Awards are featured in a special edition of Finance Monthly. In announcing the Goldstein Law Firm as Franchise Law Firm of the Year, the Law Awards 2017 describe our firm as, “a franchise law firm dedicated to you, the franchisee.” Unlike other franchise law firms that represent both franchisees and franchisors (and which, in reality, predominantly represent franchisors), the Goldstein Law Firm is exclusively dedicated to representing the interests of active and prospective franchise owners. Another factor distinguishing the Goldstein Law Firm from other franchise law firms is our representation in both transactional and dispute-resolution matters. Founding attorney Jeffrey M. […]

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Goldstein Prevails on MTD in Case Against Bathtub Manufacturer Franchisor

May 15, 2017 - Blog by |

GLF Prevails on MTD in Case Against Bathtub Manufacturer Franchisor The definition of franchise is not always clear, as this case shows. A marketer/seller/installer of walk-in bathtubs in the New York and New Jersey area could qualify as a franchise with standing to assert counterclaims against Safe Step Walk In Tub Co. (Safe Step) under the franchising laws of those states and Connecticut and Rhode Island, the federal district court in New York City has ruled. Therefore, a motion by Safe Step for dismissal of these counterclaims was denied. Safe Step alleged that agreements between the parties constituted franchises under the Connecticut Franchise Act, New Jersey Franchise Practices Act, New York Franchise Act, and Rhode Island Franchise Investment Act. Given the basis of the allegations and the plain terms of the agreements, it was easy to find that the parties’ relationship could plausibly constitute a franchisor-franchisee relationship under the FTC Rule, the court noted. The FTC Rule had three main prongs in its definition of a franchise: (1) the use of the franchisor’s marks; (2) the franchisor’s provision of marketing assistance or control over the franchisee’s operations; and (3) the franchisor’s collection of a franchise fee as a condition of the franchisee’s commencing operation. Here, the first prong of the FTC Rule was undoubtedly met at because the installer distributes goods that are identified or associated with Safe Step’s trademarks. The second prong was also met, since the alleged involvement by Safe Step in the installer’s business operations could amount […]

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Food Franchise Termination Redux — Burned Burgers or Gay Bar?

Apr 28, 2017 - Blog by |

  This food franchise dispute now in litigation in Florida has all of the expected allegations and markings of a prototypical franchisor-franchisee litigation battle in 2017: (1) a believable ulterior motive for termination (the franchisee store’s closure, according to the franchisee, was part of a scheme by the franchisor (B&B’s parent company) to oust the franchisee from the West Palm Beach dining center so the franchisor could do a competing deal with the franchisee’s competitor (Revolutions); (2) traditional ‘fraud and breach of contract’ claims by franchisee; (3) franchisee termination follows its alleged failure on a quality assurance inspection conducted by the franchisor; (4) ‘other hidden off-the-contract’ motivations for getting rid of the franchisee (franchisee was operating a gay bar on the second floor of the location, which had never before been objected to); (5) the franchisor allegedly failed to meet its contractual obligations (although the franchisee was assured 162 hours of classroom and on-the-job training, franchise claims it was provided with “zero training”; similarly, the franchisor’s “operations manual” allegedly wasn’t any help because it ‘was cut-and-pasted from manuals for sushi and Mexican restaurants’); (6) the franchisor, after the franchisee purchased the franchise, modified the entire strategic thrust of the franchise business (the franchisor allegedly moved the franchise company into the movie theater and bowling alley business — and away from a nationwide franchise roll-out, as promised); (7) the franchisor’s undisclosed strategic decision caused the franchisee to fail (according to the franchisee, with the company’s new direction, the franchisee was left […]

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Franchise Termination Results in No Beer for Anyone

Mar 29, 2017 - Blog by |

Courts, Lawyers, Franchise Agreements, Right of First Refusal, Restrictive Covenant, Competing Franchisor all combine to Create the Efficient Free Market Outcome: “No Beer for Any Consumers at an Empty Restaurant.” Interestingly, from a law and economics point of view, the legal rules and process associated with this dispute have resulted in an inefficient outcome: unused restaurant space, unemployed workers, less beer being sold, and one fewer businesses paying taxes. http://www.heraldtribune.com/news/20170327/jdubs-dub-shack-beer-bar-closes  

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Franchise and Dealer Terminations to Take-Backs (for Free)

Feb 24, 2017 - Blog by |

Instant Replay:  According to the franchisor, the franchisees are thieves and the franchisor is the good guy who is saving the community from corrupt people. Result: Massive investigations, terminations, and take-backs. The franchisor: (1) vows to stamp out underpayment of franchisee employees; (2) removes store owners who broke the rules from its system; (3) claims that “When a franchise is terminated, an independent valuation of the franchisee’s assets is undertaken and, in general, the franchisee is paid accordingly for their assets….The process for refranchising a site is also very costly and takes considerable time and corporate resources.”; (4) announced the outcome of an independent review that he said “confirmed our [franchise] model allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates”. In contrast, the franchisees: (1) claim that when Caltex forces out an owner it does so without paying compensation beyond assets, which means it could gain back stations almost free and profit from their resale or merge them into its corporate-owned store network; (2) claim that “no site with weekly shop sale of about 30K to 35K … can be profitable in your current model by fulfilling its [workplace] obligation”; (3) explain that “The truth is they [the franchisor] want the stores back to make them into company stores and that is the best way to do it – they are going to get their stores back for free.” http://www.smh.com.au/business/caltex-denies-profiting-from-terminating-franchisees-for-wage-fraud-20170221-guhqd0.html

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What to Expect in Franchise Arbitration

Nov 4, 2016 - Blog by |

If you are facing a dispute with your franchisor, there is a good chance that you will need to submit to arbitration in order to obtain a resolution. Why? Because arbitration is the preferred dispute resolution method among franchisors, and franchise agreements commonly include “mandatory arbitration” clauses which require franchisees to go to arbitration instead of seeking to enforce their rights in court. What is Arbitration? Arbitration is a form of alternative dispute resolution (ADR) that can in some ways be thought of as a “light” version of courtroom litigation. The process is still adversarial (unlike mediation, where the parties seek to work toward an amicable resolution), and a neutral third-party (either an arbitrator or a panel of arbitrators) still issues a binding decision based upon the evidence and arguments presented. The parties also still engage in discovery, although discovery is typically limited, and they still attend hearings at which their attorneys present arguments and question witnesses. However, arbitration moves at a faster pace than litigation, and as a result it is generally less expensive as well. Why Do Franchisors Prefer Mandatory Arbitration? Franchisors generally prefer arbitration for a number of reasons. Some of these reasons have to do with the controls they can exercise within the terms of their mandatory arbitration provisions, but others have to do directly with the nature of the arbitration process. Five of the top reasons that franchisors generally prefer mandatory arbitration include: Arbitration denies franchisees the right to a jury trial Franchisors can designate […]

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Considering a Franchise? An Overview of the Franchise Buying Process

Nov 3, 2016 - Blog by |

Buying a franchise is a process. From the time you formulate the idea to become a franchisee to the time you sign the franchise agreement, you will go through a number of steps – some more complicated than others – that are all critical to ensuring that you open your doors with the best possible chance for success. If you are considering buying a franchise, here is a brief overview of what you can expect along the way: Steps in the Franchise Buying Process Step #1: Get in Touch with the Franchisor The first step is to get in touch with the franchisor. This could be through the franchisor’s website, over the phone, or at an expo or other franchise event. You will likely be asked to complete an application, and at this point you may also receive a copy of the franchisor’s Franchise Disclosure Document (FDD). By law the franchisor is required to provide a minimum 14-day waiting period before you sign a franchise agreement, and as a result you will likely be asked to sign two copies of a standard receipt page confirming the date on which you received the FDD. Step #2: Hire an Attorney to Review the Franchise Agreement and FDD Once you receive the FDD (which will include a copy of the franchise agreement), you will want to give these documents to an attorney to review. For more information on choosing an attorney to review your franchise agreement and FDD, we encourage you to read: […]

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What Do You Need to Know About the “Liquidated Damages” Clause in Your Franchise Agreement?

Nov 2, 2016 - Blog by |

As a struggling franchisee, you might think that your franchisor signaling its intent to terminate your franchise agreement represents the end of a long nightmare. Unfortunately, in many cases, it is just the beginning. This is because, with increasing frequency, franchisors are including “liquidated damages” clauses in their franchise agreements. A typical liquidated damages clause may look something like this: Within 30 days of the Franchisor’s termination of this Agreement, the Franchisee will pay the Franchisor, as liquidated damages and not as a penalty, an amount equal to three (3) times the royalty fees payable either (i) during the last twelve (12) months of the Franchisee’s active operations, or (ii) the entire period that the Franchisee has been in business, whichever is the shorter period. In plain English, what this says is that, 30 days after the franchisor terminates the franchise agreement, the franchisee must pay the equivalent of three years’ royalty fees to account for the royalties that the franchisor theoretically would have earned had it not terminated the agreement. This is true even though the franchisor is electing to terminate the agreement—presumably because the franchisee has been unable to meet its royalty obligations while actually trying to operate the business. Sounds fair, right? Unfortunately, many, many franchisees have liquidated damages clauses in their agreements, and several courts around the country will enforce these clauses without regard to the often-devastating financial effects they have for terminated franchisees. Challenging the Enforceability of a Liquidated Damages Clause That said, there are […]

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