Monthly Archives: January 2018
Trends in Franchising: What Franchisees Can Expect in 2018
Jan 25, 2018 - Blog by Goldstein Law Firm |As a franchisee, finding success means meeting customers’ demands while working within the confines of a franchisor’s business system. As market conditions change and new technologies emerge, franchisees can struggle when their franchisors fail to keep pace with the times, and they can incur unnecessary financial burdens when their franchisors choose to follow the wrong path. The following are five trends that are likely to impact franchisees – for better or for worse – during 2018. 5 National Trends (With Legal Implications) Likely to Impact Franchisees in 2018 1. Proprietary Apps and Online Ordering Certain franchised brands have emerged as leaders in the trend toward proprietary apps and online ordering. Several quick service and casual dining restaurants now offer tableside tablets for ordering food, and restaurants are increasingly encouraging customers to order online for instore pickup. When used effectively, these tools can streamline the customer experience and make it easier for franchisees’ employees to keep pace during periods of high demand. However, without thorough testing and a clear plan for implementation, they can confuse and frustrate customers, and they may be destined to become relics of the past. 2. Facial Recognition and Alternative Payment Options While alternative payment options – such as Apple Pay and PayPal – have been making online shopping easier for years, many brick-and-mortar concepts are just starting to incorporate these options into their point-of-sale systems. If your franchisor wants to offer alternative payment options (including use of facial recognition) in test locations or across the entire […]
What Do Prospective Franchisees Need to Know About SBA Loans?
Jan 23, 2018 - Blog by Goldstein Law Firm |As a prospective franchisee, you have a handful of options when it comes to ways to finance your franchise. One of these options is a bank loan guaranteed by the U.S. Small Business Administration (SBA), which is commonly referred to as an “SBA loan.” While obtaining an SBA loan can help mitigate your financial risk as a franchisee, before you apply for funding, it is important to understand the terms, conditions and residual risks that these loans entail. If you are considering an SBA loan to finance your franchise, here is a brief introduction to what you need to know: 5 Important Facts about SBA Loans for Franchisees 1. An SBA Loan is Not Actually a Loan from the SBA. As we mentioned above, an SBA loan is not actually a loan from the U.S. Small Business Administration, but rather a loan from a private bank that works with the SBA. When you obtain an SBA loan, the SBA guarantees a portion of the loan, which means that the SBA will pay the bank if you are unable to do so. 2. The SBA Does Not Fully-Guarantee Franchise Loans. While the SBA will guarantee a significant portion of your loan, it will not guarantee your entirely. Depending on the amount you borrow, you may still need to personally guarantee 15 to 25 percent of the loan for your franchise. You will also need to make a down payment, and you may need to pledge assets as collateral. 3. In Order […]
Trust But Verify: 7 Resources for Finding Information About Your Franchisor
Jan 18, 2018 - Blog by Goldstein Law Firm |When you buy a franchise, your decision to move forward is largely based upon information provided by the franchisor. From marketing materials and sales pitches to the Franchise Disclosure Document (FDD) and franchise agreement, while you may receive information in multiple formats, all of these formats trace back to the same single source. Hopefully, the information you receive is up-to-date and not misleading. Hopefully, your franchisor is confident in its offering and wants you to make as informed of a decision as possible. Unfortunately, this is not always the case. As a result, it is important for both prospective and current franchisees to seek to verify their franchisors’ representations through other sources, whether that means going online, sending an email or picking up the phone. Where to Find Information About Franchisors and Franchise Opportunities If you need to find information about your franchisor or a franchise you are considering purchasing, these sources are a good place to start: 1. Current Franchisees Franchisors are required to disclose their current franchisees’ addresses and phone numbers in Item 20 of the FDD. If you have questions, there is a good chance that other franchisees in the system have either had the same question before or turned to other franchisees for help in other circumstances. As a result, you will often find that existing franchisees are more than happy to share what they know. 2. Former Franchisees The mandatory disclosures in Item 20 also include addresses and telephone numbers for franchisees who have left […]
What Do Prospective Franchisees Need to Know about Financial Performance Representations (FPR)?
Jan 11, 2018 - Blog by Goldstein Law Firm |Item 19 of the Franchise Disclosure Document (FDD) is titled, “Financial Performance Representations.” In this Item, franchisors have the option to provide information, “about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document.” Providing a financial performance representation (FPR) in Item 19 is optional. If a franchisor chooses not to provide an FPR, it must include a “negative disclosure” which states: “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting [name, address, and telephone number], the Federal Trade Commission, and the appropriate state regulatory agencies.” Many franchisors choose to provide this negative disclosure. While financial performance representations are of obvious interest to prospective franchisees, improperly-prepared FPRs can expose franchisors to litigation. As a result, rather than take the time to prepare an accurate and substantiated FPR, franchise executives (and their lawyers) often opt for the safer and simpler route. But, let’s suppose that you have received an FDD that includes an FPR. What […]
Should You Hire a Local Business Lawyer or a National Franchise Lawyer?
Jan 9, 2018 - Blog by Goldstein Law Firm |With very few attorneys focusing their practice on franchise law, chances are that there is not an experienced franchise lawyer in your local area. So, if you need an attorney to review a Franchise Disclosure Document (FDD) and franchise agreement or represent you in a franchise-related dispute, should you choose a local business lawyer, or is it better to hire an attorney who is farther away but who focuses his or her practice on franchise-related matters? While seeking legal representation locally will be your best option in many cases, hiring an attorney for franchise-related legal issues is a notable exception to this general rule. The reason for this is simple: The world of franchising is unique, and understanding the legal issues – as well as their real-world implications – requires extensive experience dealing exclusively with franchise law matters. An attorney who does not practice franchise law may be able to advise you regarding the risks of certain contract provisions and your options regarding arbitration or litigation generally, but he or she will not be able to put these issues into context, and he or she is unlikely to be familiar with the complex federal regulations and the web of state-specific franchise laws that apply. 5 Reasons Why Prospective and Active Franchisees Should Hire an Experienced Franchise Lawyer When it comes to understanding the legal implications of being a franchisee, there are countless examples of issues that require thorough knowledge of franchise-specific legal issues. Some examples include: Comparing the Benefits (and […]