FRANCHISE AND DEALER MERGERS AND ACQUISITIONS

Franchise mergers and acquisitions in the distribution industry are not uncommon. When they occur, they usually are a real threat to the continued viability of franchisees and dealers of the target or acquired franchise or distribution company. Franchise mergers and acquisitions have occurred in many assorted industries and sizes, including Dunkin’ Brands, Hilton, Wendy’s, Burger King Holdings, Carvel, Dairy Queen, Wingstop, Schlotsky’s and Moe’s Southwest Grill.

Franchise restructurings and management buyouts, instead of mergers and acquisitions, are sometimes alternatively pursued by franchisors. These types of corporate reorganizations occurred with Comfort Keepers, Meineke Car Care, and Coverall, for example. The most serious challenge to the future viability of existing franchisees and dealers arises when an investor or acquiring company is a competitor of the target such that it already has its own existing distribution network in the franchise or dealer industry of the target.

The motives for franchise and dealer merger and acquisition activity are numerous, including a desire to obtain additional customers, new products or services; a need to grow very quickly; a wish to wipe out a smaller and effective competitor; and a need to grow without making the associated investment in research, development and infrastructure. Sometimes the M&A transaction teams of professionals in franchise mergers and acquisitions focus too much of their acquisition coordination and management efforts on the generic legal matters associated with acquisitions in general to the exclusion of the unique legal issues associated with acquisitions of a franchise companies in particular.

In this regard, in addition to the normal strategic and legal issues that confront a buyer in a merger or acquisition context, a franchise or dealer acquisition and merger also requires a detailed analysis of myriad franchise and dealer-specific issues of the target distributor and franchisor, including the performance of corporate stores, performance of existing stores, planned openings of franchise locations, planned closings of franchise locations, franchise and dealer termination history, pending litigation, the existence, status and strength of any franchise or dealer association, the number and talent of existing marketing and sales personnel, the number of pending defaults and their nature, the status of disclosure documents, the assignability of the franchise and dealer agreements, and the general tenor of the relationship between the franchisor or distributor and its franchisees or dealers.

SUCCESS OF GOLDSTEIN LAW FIRM IN PROTECTING FRANCHISEES AND DEALERS THAT ARE THE TARGETS IN FRANCHISE ACQUISITIONS

Jeff Goldstein and the lawyers at the Goldstein Law Firm have over thirty years of experience and a proven track record in successfully representing only franchisees and dealers in disputes caused by dealer and franchise acquisitions and mergers. Goldstein Law Firm attorneys have in the past entered fast paced franchise acquisitions and mergers and identified business-saving provisions in franchise agreements of franchisees that were targeted in franchise and distribution mergers and acquisitions. Although many times such helpful language is found in traditional assignment or territorial provisions of existing franchise and dealer agreements, sometimes franchise and dealership agreements do not address the acquisition scenario. In these circumstances, Jeff Goldstein and his franchise law firm have been successful in developing more complex and creative arguments calling for courts to imply terms and obligations under the common law or state-specific franchise legislation.

WHAT TO DO IF YOU SUSPECT YOUR BUSINESS MAY BE HARMED BY A WRONGFUL FRANCHISE MERGER OR ACQUISITION

Regardless of the form of the franchise acquisition or merger, there always exists the real consequence of brand dilution from refranchising, melding of brands, or rebranding following the merger; and, for those franchisees or dealers of the target system that won’t be permitted to be a part of the new post-acquisition system, the risk of extinction is unquestionable. Wrongful terminations and non-renewals are a normal aspect of franchise and dealer mergers and acquisitions.

As with wrongful terminations, if you suspect that your business has been or could potentially be victimized by a franchise merger or acquisition you must act quickly under the law if you are seeking injunctive relief to stop the wrongful conduct. You should not rely solely on the representations or promises of the entity that has taken over your franchise; the goal of the new franchisor is to maximize its profits, even if that means getting rid of you and your brand, or competing directly with you, after the franchise merger or acquisition.

To effectively combat an actual or anticipated wrongful dealer or franchise default, you should contact franchise lawyer Jeff Goldstein at the Goldstein Law Firm at 202-293-3947. Don’t let your franchisor or supplier’s improper default cause you to lose your franchise and all of the goodwill you have worked tirelessly to create.

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Goldstein Law Firm, PLLC

1629 K St. NW, Suite 300,
Washington, DC 20006

Phone: 202-293-3947
Fax: 202-315-2514

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