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What are the Grounds for Initiating Franchise Litigation? When you bought your franchise, you did not expect to end up with litigation with your franchisor. But, an issue has come up and there does not seem to be any other alternative, and you need to consider all of your options for protecting your investment. In this Ultimate Guide to Franchise Litigation for Franchisees, attorney Jeffrey M. Goldstein provides an overview of what franchisees need to know when facing contentious disputes with their franchisors. Here in Part 1, Mr. Goldstein covers the types of issues that tend to lead to litigation, with insights based on his 30-plus years of experience as a franchise litigation attorney exclusively representing franchisees. Common Issues in Franchise Litigation While there are numerous issues that can lead to litigation between franchisors and franchisees, some issues tend to come up more frequently than others. This includes issues that cause franchisors to initiate litigation against their franchisees, as well as issues that force franchisees to take action in order to try to save their franchises—or at least recoup as much of their initial investment as possible. On the franchisor side, some of the issues that most-commonly trigger the decision to take legal action against franchisees include: Non-payment of royalties or advertising fund contributions Non-payment of liquidated damages or “lost future royalties” post-termination Repeatedly operating outside of a franchisee’s designated territory Failing to adhere to system standards (either repeatedly or in a manner that represents a significant departure from the […]

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Buying a franchise is a big decision that requires a substantial investment, and there is a significant amount of risk involved. As a result, regardless of your background and experience, you are going to want help along the way. You know that you need to hire a franchise attorney to review the Franchise Disclosure Document (FDD) and help you negotiate the franchise agreement, but should you hire a franchise consultant as well? What Should You Look for in a Franchise Consultant? For many prospective franchisees, hiring a franchise consultant will be a good option. If you need help with things like budgeting and site selection, an experienced franchise consultant will be able to provide a lot of value as you work toward opening your franchise. If you believe that you could benefit from working with a franchise consultant, here are some factors to consider when choosing someone to advise you: Franchise Industry Experience – The franchise industry is unique in many respects; and, in order to advise you effectively, a franchise consultant will need to have deep industry experience. Ideally, he or she will have past experience as a successful franchisee or as a franchisor executive. Objectivity – When working with a franchise consultant, you need to be confident that he or she is providing objective advice. If it feels like a consultant is steering you toward a particular franchise opportunity, you will want to make sure this is based on an assessment of your best interests and not other […]

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The novel coronavirus pandemic is having unprecedented effects on our nation’s economy, and many companies are being forced to lay off their employees due to mandatory closures of “non-essential” businesses. Certain industries, such as the restaurant and fitness industries, have been hit particularly hard; and, in order to avoid the risk of being laid off again, some individuals may be considering the possibility of becoming their own boss by buying a franchise. If you fall into this category, should you think seriously about getting into the world of franchising? Here are some important considerations to keep in mind: 1. You Should Not Make a Long-Term Decision Based on Your Short-Term Circumstances While the novel coronavirus pandemic is (hopefully) a once-in-a-lifetime event, things will eventually return to normal. So, while you may be out of work for now, the job market will bounce back, and employers in certain industries are actually hiring aggressively during the pandemic. If you understand the franchise model and are serious about becoming a franchise owner, it may be an option worth considering. However, if you are simply focused on weathering the storm, there are likely better (and less risky) alternatives available. 2. You Will Need to Have Sufficient Cash Reserves to Build a Profitable Business When you buy a franchise, your business will not be profitable immediately. It takes time to build a profitable business, and most franchisors recommend that their franchisees have anywhere from three to twelve months of capital reserves on hand when they […]

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Each year, the Franchise Times publishes its list of “Best Franchises to Buy,” also known as the “‘Zor Awards” (for those who aren’t in the know, “‘zor” is industry shorthand for “franchisor”). It recently published its list of award recipients for 2020, with the following franchises named the best in their respective categories: Around the House (Home Repair) – The Glass Guru Quick Flip (Quick-Service Burger Restaurants) – Culver’s Fresh Baked (Bakeries and Cafés) – McAlister’s Deli Cut & Dry (Lawn Care and Painting) – Five Star Painting Game, Set, Match (Sports Bars) – Twin Peaks After the Storm (Disaster Restoration) – Paul Davis Restoration Window Shopping (Retail) – uBreakiFix Sweat It Out (Boutique Fitness) – CycleBar Help Wanted (Employment and Staffing) – PrideStaff Bring it Home (Delivery and Takeout Pizza) – Toppers Methodology for the Franchise Times ‘Zor Awards So, what does it mean for a franchise to be named the “best” in its category by the Franchise Times? In How We Chose the ‘Zor Awards, the publication breaks down its selection process: Identifying Candidates for Inclusion – In order to be considered, a franchise must have fallen into one of the 10 categories listed above, and it must have been listed in the Franchise Times’ “Top 200+” database. The Franchise Times, “further narrowed the list by analyzing the quality of information in each brand’s Item 19 [disclosures] or other key financial data, and also focusing on brands that are currently expanding inside the United States.” Financial Metrics Focused […]

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If you are serious about buying a franchise, you are most likely aware of the recommendation that you hire a lawyer to perform a franchise business review. But, with all of the up-front costs you will need to incur already, and since you are prepared to move forward even though the opportunity has its risks, do you really need to pay for a review? Of course, you know our answer already. With more than 30 years of experience in franchising, we have represented thousands of new and existing franchisees, and we have seen far too many franchisees struggle and lose their businesses simply because they failed to take the necessary precautions during the buying process. With this in mind, here are our top four reasons why we believe all prospective franchisees need franchise business reviews. Learn about Our Fixed-Fee Franchise Business Review Programs Are you thinking about buying a franchise? For more information about our firm’s fixed-fee franchise business review programs, call us at 202-293-3947 or inquire online today.

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Rent-to-own operators Aaron’s Inc., Buddy’s Newco, LLC, and Rent-A-Center, Inc. agreed to settle FTC charges that they negotiated and executed reciprocal purchase agreements in violation of federal antitrust law. Rent-to-own operators Aaron’s Inc., Buddy’s Newco, LLC, and Rent-A-Center, Inc. agreed to settle FTC charges that they negotiated and executed reciprocal purchase agreements in violation of federal antitrust law. The complaints allege that from June 2015 to May 2018, Aaron’s, Buddy’s, and Rent-A-Center each entered into anticompetitive reciprocal agreements with each other and other competitors. The three proposed consent agreements prohibited the rent-to-own companies and their franchisees from entering into any reciprocal purchase agreement or inviting others to do so, and from enforcing the non-compete clauses still in effect from the past reciprocal purchase agreements. After a public comment period, the Commission announced the final consent agreements. DISSENTING STATEMENT OF COMMISSIONER ROHIT CHOPRA Office of Commissioner Rohit Chopra UNITED STATES OF AMERICA Federal Trade Commission WASHINGTON, D.C. 20580     In the Matter of Rent-to-Own Market Allocation Scheme Commission File No. 1910074 February 21, 2020   Summary   The FTC uncovered evidence that three major rent-to-own players engaged in a market allocation scheme to close down stores that suppressed competition, but the agency is not asserting that this conduct was per se The proposed settlement deprives affected families of direct notification by the companies of their wrongdoing. This goes against a core element of competitive markets: the dissemination of truthful There is clear evidence that a senior executive served on the board […]

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Legal Life after the Coronavirus Death for Small Businesses, Franchisees and Dealers By: Jeffrey M. Goldstein  www.goldlawgroup.com Second in a Series: COVID-19 HAS KILLED MY BUSINESS – MAY I LEGALLY TERMINATE MY CONTRACTS? Those who hope or believe that the consequences, effects, and sources of COVID-19 will soon be arrested and contained might be wondering whether their inability to have complied with their contracts, leases, and mortgages during this waiting period can lead to a subsequent termination of or suit under their agreements for failure to have fully complied with all of the contractual obligations in these contracts. Although I don’t anticipate that ‘other parties to your contracts’ individually or as a group are preparing or conspiring to terminate, default, or cancel anyone’s agreements, this does not rule out the high probability that when things return to normal (when market forces begin to work again unimpeded by the myriad current external shocks), every firm will naturally begin to focus again on ‘maximizing profits’ – the legitimate and necessary goal of individual suppliers in a free market economy. In general, whether you’re able to use COVID-19 as a legal ‘excuse’ for your inability to pay or otherwise perform during the coronavirus downtime is subject to whether the agreement in issue contains a provision or language that excuses your performance for unanticipated or unforeseen events. While many agreements contain such clauses, referred to as ‘force majeure’ clauses (clauses that excuse performance based on unexpected events such as floods, epidemics, riots, wars, etc.), […]

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The coronavirus (COVID-19) (“the Virus”) has made it impossible or impracticable for many businesses to comply with their contracts. The party who must ultimately bear the loss associated with the Virus largely depends on whether the explicit language in their contract contains a ‘force majeure’ clause. In the absence of such language, liability for the non-performance will turn upon the law of ‘impossibility’ in the applicable jurisdiction. Not only has the Virus physically disabled those responsible for meeting contractual obligations, but it also has caused many state and local authorities to issue orders banning or severely restricting association, gatherings and travel, for instance, which, in turn, create such impossibility or impracticability. The evolution of the Virus, as well as government and business responses thereto (quarantine and containment orders), has caused many businessmen, and lawyers in unrelated niches, to ask whether any legal excuses exist to discharge promisors from contractual obligations impacted by the Virus. As discussed below, and as will be discussed in more detail in subsequent articles in this series, businesses, including franchisees, distributors and dealers, who find themselves unable to meet certain obligations in their contracts, should seek legal assistance to determine whether force majeure or the common law of impossibility or impracticability excuses their contractual performance. While force majeure generally refers to unforeseeable “acts of God,” impossibility is a broad-sweeping doctrine that picks up events and occurrences that arguably substantially impede performance even though they are not nature related (e.g., blindness or death of famous artist in […]

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Even though many industries have been devastated by COVID-19, the Antitrust Division in the Department of Justice has publicly warned all companies that they still are ‘being watched’ by government trust-busters. The DOJ Press Release singles out manufacturers and distributors of health products such as face masks, respirators, and diagnostics. Search form Search ABOUT OUR AGENCY PRIORITIES NEWS RESOURCES CAREERS CONTACT You are here Home » Office of Public Affairs » News SHARE JUSTICE NEWS Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Monday, March 9, 2020 Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Products The Department of Justice today announced its intention to hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics.  The department’s announcement is part of a broader administration effort to ensure that federal, state, and local health authorities, the private healthcare sector, and the public at large are in the strongest possible position to respond to the outbreak of the respiratory disease named coronavirus disease 2019 (COVID-19). “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time,” said Attorney General William P. Barr.  “I am committed to ensuring that the department’s resources are available to combat any wrongdoing and protect the public.” Individuals or companies […]

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In January 2020, Franchise Direct published two articles, A Look at How Franchises Impact the Economy and Franchising by the Numbers, that provide a nice overview of the current state of the franchise industry. Here, franchise attorney Jeffrey M. Goldstein covers some of the highlights: 1. There are More than 750,000 Franchises in the U.S. with More than 8 Million Employees According to Franchise Direct, as of January 2020, “[i]n the United States, over 750,000 franchise establishments are operating and employ around 8.17 million people.” Franchise Direct also reports that another 13.3 million jobs are “supported by franchises.” Citing the most-recent economic data, Franchise Direct reports that gross revenue from franchisees topped $868 billion in 2016, compared with $675 billion a decade earlier. 2. Food Continues to Dominate the Franchise Industry Across all sectors, food establishments accounted for the most employment in franchising, providing just under 473,000 jobs across the country. Based on global sales data, the three most-successful U.S.-based franchises are McDonalds, 7-Eleven, and KFC. 3. Franchise Ownership Demographics are Shifting It used to be that the majority of franchise owners were middle-aged or older, and typically seeking to transition out of an unfulfilling job or use their career experience to build their own business. While this is still the case today, Franchise Direct reports that 12 percent of franchisees are now 34 years of age or younger, and more than half of franchisees (54 percent) own two or more outlets. 4.  Franchising is Expected to Continue Its Upward […]

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