Monthly Archives: July 2016
The franchise industry is booming. According to the International Franchise Association’s Franchise Business Economic Outlook for 2016, the number of franchised outlets, number of franchise employees, and gross domestic product (GDP) from franchised businesses all increased more than expected during 2015. Last year’s growth figures exceeded those from 2014, and the International Franchise Association expects to see similar growth in 2016. For franchisees, the franchise model has its benefits. However, these benefits come with strict limitations as well. So, if you want to own your own business, is a franchise worth it? Benefits of Buying a Franchise Talk to any franchise consultant, and you will hear pretty much the same story about why franchising is a smart alternative to building an independent business from the ground up. Generally speaking, the hallmark benefits of buying a franchise include: Brand Recognition – Customers who want to know what to expect rely heavily on brand recognition (consciously or not) in deciding where to spend their money. Unlike starting a business from scratch, with a franchise you have instant credibility. Proven System – Franchisors offer proven systems, covering everything from site selection and trade dress to point-of-sale technology and back-end financial management. When you buy a franchise, you are buying the right to benefit from the franchisor’s background and expertise. Franchisor Support – Franchisors have an interest in making sure their franchisees are successful. Successful outlets mean more royalties and better selling points for new prospective franchisees. Of course, some franchise systems offer more […]
We’ll start with the bad news first: Your franchise agreement probably does not give you the right to terminate. Franchisors like control, and this includes deciding why – and when – franchisees leave the system. As a result, most contemporary franchise agreements include plenty of termination rights for the franchisor and none for the franchisee. Does this mean you are out of options already? Not necessarily. Four Ways to (Potentially) Get Out of a Franchise Relationship While your options for getting out of your franchise agreement will be highly dependent upon your unique individual circumstances, the following are four potential options for franchisees seeking to extricate themselves from franchise relationships: 1. Assert Your Right to Terminate. Although most standard franchise agreements do not provide franchisee termination rights, some do; and, if you hired an attorney to negotiate your franchise agreement, you may have termination rights that are not available to other franchisees in the system. As a result, if you are seeking to get out of your franchise, your first step should be hiring a franchise attorney to tell you what your agreement says about termination. However, even if you have termination rights, they are most likely default-based (or “for cause”), so you will need to be able to point to a significant breach of your franchisor’s obligations in order to exercise your right to terminate. 2. Assert a State Franchise Law Violation. Various states around the country have franchise laws in place that restrict certain franchisor activities and provide […]
As a franchisee, there are few things worse than coming to the realization that you may need to sue your franchisor. Unfortunately, for many franchisees, this is reality, and taking legal action is the only way to protect their investment and their legal rights. If you are at the point of considering franchise litigation, this article provides an overview of potential causes of action that franchisees can assert against their franchisors. To find out what claims you may have available, we encourage you to contact us immediately for a free consultation. Common Claims in Franchise Litigation Franchise Disclosure Violations Under federal law and the laws of various states around the country, franchisors owe a duty to provide timely and accurate disclosures to potential franchisees. These disclosures must be made in the form of a Franchise Disclosure Document (FDD), which, depending on the state where you live, may need to be registered before the franchisor can begin selling franchises. Some common forms of franchise disclosure violations include: Your franchisor failed to provide you with an up-to-date FDD Your franchisor sold you a franchise too soon after providing you with its FDD Your franchisor included misrepresentations or exaggerations in its FDD Your franchisor underestimated the initial investment to open your franchise in Item 7 of the FDD Your franchisor provided an inaccurate or unsubstantiated “financial performance representation” Breaches of the Franchise Agreement While most franchise agreements are fairly limited in terms of establishing affirmative obligations for the franchisor, there are still typically […]
If your aspirations as a franchisee extend beyond opening a single location, you potentially have a few different options available. Franchisors often favor selling new territories to well-qualified and trusted franchisees, and as a result over the years the industry has developed a number of “standard” methods for providing expansion options to franchisees seeking multi-unit opportunities. These methods include: Area Development Agreements Rights of First Refusal Options for Additional Territories Methods for Securing Multi-Unit Franchise Development Rights 1. Area Development Agreements When you sign an Area Development Agreement, you receive the right to open multiple outlets. However, you also have the obligation to open these outlets – most likely on a very tight schedule or within a very limited period of time. As a result, when considering an Area Development Agreement, it is critical to thoroughly assess both the market conditions and your financial capacity to ensure that you are not taking on an unviable business or biting off more than you can chew. Importantly, when you enter into an Area Development Agreement, you will still be required to sign a Franchise Agreement for each individual outlet. As an area developer, carefully negotiating both the Area Development Agreement and the individual Franchise Agreements is critical to protecting your multi-unit development and individual franchise rights. Remember, franchisors want as many protections as possible, and it is very possible that your franchisor’s standard agreements allow for termination of all of your rights if you fail to meet your development schedule or if […]
When evaluating a new franchise opportunity, there are plenty of considerations to keep in mind. What is the best location? Will you need to hire employees? If so, how can you find people you can trust? How and when will you roll out your initial advertising campaign? Amidst the excitement and practicalities involved in opening a franchised business, it is easy to want to jump ahead. Unfortunately, for some franchisees, this means overlooking a key step: hiring an experienced franchise attorney to review and help you understand the franchise agreement. The Importance of Negotiating with Your Franchisor When prospective franchisees decide not to hire an attorney, there are usually a couple of reasons why. First, they assume that the franchise agreement is non-negotiable. Or, even if it is negotiable, they do not want to “get off on the wrong foot” by getting into legal negotiations with their new franchisor. Second, they assume that all franchise agreements are the same. They are set on getting into the world of franchising, and they take for granted that submitting to the terms of a franchisor-friendly contract is just part of the process. However, the truth of the matter is that franchisees can (and should) negotiate their franchise agreements, and franchise agreement terms can vary widely from one system to the next. Quality franchisors should be open to – and even expect – reasonable negotiations, and in many cases negotiations will simply focus on clarifying ambiguities and bringing the terms of the agreement up […]
Immediate Opening For Third Year Law Student or Recent Graduate Small litigation boutique in Washington, DC with national practice seeks Third Year Law Student for part-time work. This will involve litigation assignments including pleadings preparation. Practice is national, and contact with partner and clients is almost exclusively by internet, phone and email. Hourly rates are negotiable based on experience. The estimated hourly hours per week are 10-15. A commitment through the end of the school year is required. Interested in Applying? Interested candidates should be ready to begin work immediately, and express interest by sending a copy via Email of a letter of interest, your resume and two writing samples to: Jeffrey Goldstein; Goldstein Law Firm 1629 K ST. N.W. Suite 300 Washington D.C., 20006 firstname.lastname@example.org goldlawgroup.com 202-293-3947 About The Goldstein Law Firm The Goldstein Law Firm is one of only four national franchise law firms in the country that represents exclusively franchisees and dealers. Jeff Goldstein’s practice covers prolific and myriad commercial complex litigation matters, and Jeff is regularly sought out by franchisees and dealers from foreign countries (e.g., UAE, South America, United Kingdom) to represent them in disputes with United States franchisors and suppliers. Under the formation, growth and supervision of Jeff Goldstein, the law firm is recognized as a top tier franchise law firm for franchisees and dealers.
Immediate Opening For Second or Third Year Law Student or Recent Graduate Small litigation boutique in Washington, DC with national practice seeks Second or Third Year Law Student for short legal research and writing assignments. Employment could lead to litigation assignments including pleadings preparation. Practice is national, and contact with clients is almost exclusively by internet, phone and email. Similarly, assignments and contact with applicant by Firm will be by internet, phone and email. Hourly rates are negotiable based on experience. The estimated hourly hours per week are 10. A commitment through the end of the school year is encouraged. Interested in Applying? Interested candidates should be ready to begin work immediately, and express interest by sending a copy via Email only of your resume and two writing samples to: Jeffrey Goldstein; Goldstein Law Firm 1629 K ST. N.W. Suite 300 Washington D.C., 20006 email@example.com goldlawgroup.com 202-293-3947 About The Goldstein Law Firm The Goldstein Law Firm is one of only four national franchise law firms in the country that represents exclusively franchisees and dealers. Jeff Goldstein’s practice covers prolific and myriad commercial complex litigation matters, and Jeff is regularly sought out by franchisees and dealers from foreign countries (e.g., UAE, South America, United Kingdom) to represent them in disputes with United States franchisors and suppliers. Under the formation, growth and supervision of Jeff Goldstein, the law firm is recognized as a top tier franchise law firm for franchisees and dealers.
If you have had enough and are ready to sue your franchisor, there are a few things you need to know. First, we sympathize with your situation. Having represented franchisees and dealers exclusively for more than 30 years, we know just how bad some franchise “relationships” can turn out to be. Second, you may need to pump the brakes. Before you hire just any old plaintiff’s attorney to take your case to court, there could be some key provisions in your franchise agreement that you need to keep in mind. The Dispute Resolution Provisions in Your Franchise Agreement Most franchise agreements contain several provisions relating to dispute resolution; and, as you might expect, most of these provisions are designed to be franchisor-friendly. The typical franchise agreement will include some or all of the following: Mandatory Mediation Before you can sue your franchisor in court, you may first have to submit your claim to mediation. Some franchise agreements even require the parties to submit to mediation before they can go to mandatory arbitration (see below). Mediation is a form of non-binding alternative dispute resolution (ADR) in which the parties attempt to work together with the help of a neutral third-party mediator to amicably resolve their differences. Mandatory Arbitration Arbitration differs from mediation in that the neutral third-party (in this case, an “arbitrator”) makes a decision on behalf of the parties. The arbitrator’s decision may or may not be binding, and in some cases franchise agreements will actually call for a decision […]