Monthly Archives: June 2018

5 Special Considerations for Purchasing a Restaurant Franchise

Jun 29, 2018 - Blog by |

Despite significant growth in other sectors, restaurants remain the predominant force in the franchise industry. According to data published by the International Franchise Association, in 2017 roughly 220,000 of the 744,000 franchised outlets worldwide were quick-service and full-service restaurants. For individuals and business partners contemplating restaurant franchise opportunities, there are a number of important factors to take into consideration. This includes franchise-specific factors, restaurant-specific factors and factors that are relevant to all businesses, generally. From a legal perspective, some of the most-important factors include: 1. Site Selection For restaurant franchises, site selection is of paramount importance. When you are relying on a recognizable brand name to get customers through the door, you need your restaurant to be both highly visible and easily accessible. Nearby businesses are a relevant consideration as well. Are there stores nearby that will bring traffic to the area? Are there competing restaurants (or vacancies for competing restaurants) that will make it difficult to turn a profit? When negotiating your lease, these are just a few of the many issues you will want to address with your landlord. 2. Territorial Protection In the world of franchising, intra-brand competition is an important consideration as well. Ideally, your franchise agreement will provide true territorial exclusivity with a sufficient radius to protect you against losing customers to competing franchisees or the franchisor’s company-owned outlets. 3. Initial Investment and Upgrades Restaurant franchises tend to have large initial investments. When evaluating a restaurant franchise opportunity, it is important to conduct your own […]

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I Received a Notice of Default from My Franchisor. What Should I Do?

Jun 22, 2018 - Blog by |

So, you received a Notice of Default. Whether it came as a surprise or was a long time coming, it showed up in the mail, and now you have to deal with it. What does the Notice of Default mean for the fate of your franchise? What are your legal rights? What are your franchisor’s legal rights? What options do you have available? This article provides a brief introduction to what you need to know. Steps to Take After Receiving a Notice of Default from Your Franchisor If you have received a Notice of Default from your franchisor, taking these steps will help you protect your investment and avoid mistakes that could lead to unnecessary termination of your franchise: Step No. 1: Assess the Validity of the Alleged Default As a franchisee, your legal rights are limited. Even if your state has a franchise relationship law, if you have committed a default, you could be at risk for losing your franchise. So, the first step after receiving a Notice of Default is to assess the validity of your franchisor’s allegations. Have you violated your franchise agreement (i.e. by not paying royalties)? Is there room for interpretation? Or, are your franchisor’s allegations entirely unsubstantiated? Step No. 2: Avoid a Knee-Jerk Response Regardless of whether you believe the Notice of Default is valid, you need to avoid a knee-jerk response. Too often, disgruntled franchisees attempt to retaliate or go public with their grievances on social media. In order to avoid an unnecessary […]

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How Can a Franchise Lawyer Help During the Franchise Buying Process?

Jun 15, 2018 - Blog by |

If you have been doing your research on buying a franchise, you have no doubt heard that you need to hire a franchise lawyer to help you through the process. But, do you know why? If you have made up your mind and the franchisor only offers a standard “form” contract, what is the value in hiring a franchise attorney? Actually, there are several reasons why prospective franchisees need to seek experienced legal representation. Here are just some of the ways that a franchise lawyer can help during the franchise buying process: 1. An Independent Perspective As a prospective franchisee, the primary factors influencing your choice of a particular franchise opportunity are: (i) information you received from the franchisor, and (ii) your personal feelings about the franchise (and, perhaps to a lesser extent, its competitors). A franchise lawyer can offer an independent perspective. Are you viewing the opportunity through rose-colored glasses? Is the franchisor’s sales rep conveniently omitting certain information? An experienced franchise lawyer will be able to take a step back and take personal motivation out of the equation. 2. Industry Insights How does the franchisor really stack up against its competitors? Are its franchise agreement terms on par with those offered throughout the industry? Does the franchisor have a history of litigating with its franchisees? How is the franchisor viewed amongst its peers and industry professionals? While not all franchise lawyers will have these types of insights, one who has been in the industry for decades will have […]

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What Would a Wage Hike Mean for McDonald’s Franchisees?

Jun 8, 2018 - Blog by |

McDonald’s has been in the headlines recently, and not for re-launching the McRib or promoting new healthier side items. Instead, the fast food chain has been in the news because employees around the world have informally begun to demand higher wages in a movement being labeled as, “#McStrike”. While these types of movements usually garner public support, as is often the case, the realities of forcing higher wages at McDonald’s belie the storylines that make for good news. A mandatory wage hike would mean even more financial struggles for franchisees, and it may ultimately do more harm than good for the chain’s frontline workers. The Realities of a Mandatory Wage Hike at McDonald’s While most people tend to think of McDonald’s as a huge corporation with restaurants around the globe, the reality is that “corporate” McDonald’s only owns about 10 percent of the fast food chain’s stores worldwide. The remaining 90 percent are owned by franchisees, many of whom are “mom and pop” operators who have invested their life’s savings in a restaurant with a proven system and a well-known brand. But, despite McDonald’s ubiquity, for most of these franchisees, profit margins are razor thin. On top of making payroll while selling Dollar Menu food items, franchisees must also pay monthly royalties to McDonald’s, and they must constantly make updates and upgrades to accommodate new offerings and changes to the chain’s trade dress and system standards. While many franchisees are able to operate their stores for years, the reality is […]

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