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In a previous article, we highlighted the importance of asking questions during the due diligence process, and we discussed four types of issues that demonstrate why franchisees should not rely on franchisors’ Franchise Disclosure Documents (FDDs) and marketing materials alone. We also mentioned the importance of talking to both current and former franchisees. This article covers some basic tips and questions to ask when contacting current and former franchise owners. How to Find Current and Former Franchisees But, before we get ahead of ourselves, how do you contact current and former franchisees? Fortunately, the requirements of Item 20 of the Franchise Disclosure Document (FDD) make this simple. In Item 20, franchisors must disclose contact information for: Current franchisees, Franchisees who have left the system within the past year, and Franchisees who have not communicated with the franchisor within the past 10 weeks. When contacting these individuals, keep in mind that they may have additional references as well. They may have an older version of the FDD that they are willing to share; or, they may know of other current or former franchisees who can impart particularly-valuable information. Questions to Ask Current and Former Franchisees During Due Diligence Once you start reaching out to current and former franchisees, what types of questions should you ask them? Here are some general recommendations: 10 Questions for Current Franchisees Has the franchise opportunity met your expectations? In what ways is operating your franchise different from what you expected? Are you consistently able to meet […]

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When exploring franchise opportunities, it is easy to become committed to a particular brand and system early in the process. When this happens, for many people the due diligence process becomes a formality – a way to find affirmations that you have already made the right decisions. But, this can be a mistake. Many franchisors rely on their ability to make a good first impression, and they do not want prospective franchisees to dig deeper into the system. They do not want prospects to ask about things like carve-outs from their territorial rights, and they do not want them to have the insights of existing and former franchisees. Yet, these are precisely the types of information that are required in order to make an informed decision during the franchise buying process. If you are preparing to buy a franchise but have not yet performed your due diligence, here are some key questions you will want to ask before you sign: Questions for the Franchisor 1. What are my territory rights? Some franchisors offer exclusive territories, some offer protected territories, and some offer territories with no protection at all. Even “exclusive” territories will often be subject to exceptions. If your franchise agreement is not crystal clear on the definition of your territory, this is something that you will almost certainly want to have addressed before you pay your initial franchise fee. 2. How often do you make system-wide changes? Many franchisors – especially newer ones – make constant changes to their […]

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If your experience as a franchisee has not gone as you hoped, you may be facing the prospect of termination. When it comes to protecting your rights as a franchisee, taking legal action prior to termination can help ensure that you have as many options as possible. So, how do you know if your franchisor is planning to terminate? While not necessarily determinative, here are five common signs that a termination notice may soon be arriving at your franchise’s door: 1. You Cannot Get in Touch with the Franchisor. If the franchisor’s representatives have suddenly become unresponsive, this may be a bad sign. When franchisors are planning to terminate a franchise, they will often (quickly) devote their resources elsewhere, and they may even have concerns about communicating in the face of potential litigation. 2. You are Being Treated Differently Than Other Franchisees. Along with lack of communication, other forms of disparate treatment can be potential warning signs of impending termination as well. For example, if other franchisees are rolling out new promotional materials, or if they are being asked to adopt updated system standards, being left out could be a sign that the franchisor is not planning to keep you in the system long-term. 3. You are Struggling with the Renewal Process While the renewal process can be a challenge even under the best of circumstances, if you are struggling to renew your franchise, there may be a reason why. The franchisor may want you out of the system, and […]

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The Goldstein Law Firm is privileged to announce that firm founder Jeffrey M. Goldstein has recently been named a Global Law Expert in franchise law. Based in London, Global Law Experts (GLE) recognizes exceptional attorneys worldwide and is billed as, “[t]he premier guide to leading legal professionals throughout the world.” Recognition by Global Law Experts provides notable distinction: GLE recognizes just one attorney in each practice area per county. According to GLE’s website, it is the only organization to do so. Consideration requires a peer recommendation or approval by Global Law Experts’ research department, and all candidates must complete, “an intensive research process before being passed onto the Nominations Panel for final assessment and validation.” Each year, GLE sends its Recommendation Questionnaire to over 45,000 business leaders, advisors and in-house attorneys to solicit recommendations for the world’s leading attorneys. About Global Law Experts Global Law Experts currently recommends and endorses lawyers in 140 countries and over 50 areas of practice. Rather than focusing solely on attorneys at large international law firms, GLE also understands that the level of service provided by attorneys at smaller boutique practices can often exceed that provided by partners in Big Law. As stated by GLE: “It’s often easy to assume bigger means better, but that is not always the case with law firms; boutique practices specialise in just one legal field and as a result can often offer the same (if not better) advice on a more personal level at a typically lower hourly rate […]

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The High Court in Kuala Lumpur, in refusing to prohibit a former franchisee from operating independently after a termination, caused more damage to the Franchisor (Chatime Fusion Tea House) than a horde of Helopeltes. The Judge ruled that the Franchisor’s termination was in bad faith and that an injunction preventing the Franchisee from operating would “cause great injustice.” The Franchisee in the case was so angry that he filed a police report regarding the termination.  Too funny. The Goldstein Law Firm has recently been successful in seven straight injunctive cases even though these types of emergency actions are the most difficult to win for franchisees.  http://www.freemalaysiatoday.com/category/nation/2017/05/29/court-dismisses-chatimes-bid-for-injunction-against-ex-franchise-holder/      

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The Goldstein Law Firm is pleased to announce that founding attorney Jeffrey M. Goldstein has been named among the Esteemed Lawyers of America®. This is the third time this year Mr. Goldstein and the firm have been awarded for their achievements and client service, following the firm’s recognition as Best Franchise Disputes Law Firm 2017 – USA by Acquisition International and Franchise Law Firm of the Year in the 2017 Finance Monthly Law Awards. Esteemed Lawyers of America® (ELOA) is an organization whose mission is, “to recognize the most respected lawyers in the country.” It seeks to help individuals and businesses find quality legal representation by offering a list of attorneys who are both (i) recommended by their peers, and (ii) qualified for recognition based upon their experience, commitment to client service and ethical standards. As described by the organization: “ELOA was established to honor those attorneys who are the most respected and esteemed by their peers throughout the legal community, and to help consumers identify them. . . . The best attorneys are being replaced by better marketers[,] and consumers don’t often know who the finest lawyers are anymore. By identifying the top lawyers as determined by the people who know them best – other lawyers – and educating the public as to who they are, Esteemed Lawyers of America® aims to change that.” Selection Criteria for Esteemed Lawyers of America® Membership in Esteemed Lawyers of America® is conditioned upon successful completion of a two-stage application process. The first […]

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We are proud to announce that the Goldstein Law Firm was recently named “Franchise Law Firm of the Year” in the 2017 edition of Finance Monthly’s Law Awards. According to a press release from Finance Monthly announcing this year’s award winners: “Every year[,] the Finance Monthly Law Awards recognise and celebrate law firms and legal professionals from all over the world who, over the past twelve months, have consistently excelled in all aspects of their work and set new standards of client service.” The nomination and review process for Finance Monthly’s Law Awards involves months of work by a “diligent research team and dedicated judging panel,” who are tasked with producing a list of winners that represents, “some of the most successful and trusted legal professionals and law firms from across the globe.” “[A] franchise law firm dedicated to you, the franchisee.” Law firms honored as recipients of the Law Awards are featured in a special edition of Finance Monthly. In announcing the Goldstein Law Firm as Franchise Law Firm of the Year, the Law Awards 2017 describe our firm as, “a franchise law firm dedicated to you, the franchisee.” Unlike other franchise law firms that represent both franchisees and franchisors (and which, in reality, predominantly represent franchisors), the Goldstein Law Firm is exclusively dedicated to representing the interests of active and prospective franchise owners. Another factor distinguishing the Goldstein Law Firm from other franchise law firms is our representation in both transactional and dispute-resolution matters. Founding attorney Jeffrey M. […]

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GLF Prevails on MTD in Case Against Bathtub Manufacturer Franchisor The definition of franchise is not always clear, as this case shows. A marketer/seller/installer of walk-in bathtubs in the New York and New Jersey area could qualify as a franchise with standing to assert counterclaims against Safe Step Walk In Tub Co. (Safe Step) under the franchising laws of those states and Connecticut and Rhode Island, the federal district court in New York City has ruled. Therefore, a motion by Safe Step for dismissal of these counterclaims was denied. Safe Step alleged that agreements between the parties constituted franchises under the Connecticut Franchise Act, New Jersey Franchise Practices Act, New York Franchise Act, and Rhode Island Franchise Investment Act. Given the basis of the allegations and the plain terms of the agreements, it was easy to find that the parties’ relationship could plausibly constitute a franchisor-franchisee relationship under the FTC Rule, the court noted. The FTC Rule had three main prongs in its definition of a franchise: (1) the use of the franchisor’s marks; (2) the franchisor’s provision of marketing assistance or control over the franchisee’s operations; and (3) the franchisor’s collection of a franchise fee as a condition of the franchisee’s commencing operation. Here, the first prong of the FTC Rule was undoubtedly met at because the installer distributes goods that are identified or associated with Safe Step’s trademarks. The second prong was also met, since the alleged involvement by Safe Step in the installer’s business operations could amount […]

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  This food franchise dispute now in litigation in Florida has all of the expected allegations and markings of a prototypical franchisor-franchisee litigation battle in 2017: (1) a believable ulterior motive for termination (the franchisee store’s closure, according to the franchisee, was part of a scheme by the franchisor (B&B’s parent company) to oust the franchisee from the West Palm Beach dining center so the franchisor could do a competing deal with the franchisee’s competitor (Revolutions); (2) traditional ‘fraud and breach of contract’ claims by franchisee; (3) franchisee termination follows its alleged failure on a quality assurance inspection conducted by the franchisor; (4) ‘other hidden off-the-contract’ motivations for getting rid of the franchisee (franchisee was operating a gay bar on the second floor of the location, which had never before been objected to); (5) the franchisor allegedly failed to meet its contractual obligations (although the franchisee was assured 162 hours of classroom and on-the-job training, franchise claims it was provided with “zero training”; similarly, the franchisor’s “operations manual” allegedly wasn’t any help because it ‘was cut-and-pasted from manuals for sushi and Mexican restaurants’); (6) the franchisor, after the franchisee purchased the franchise, modified the entire strategic thrust of the franchise business (the franchisor allegedly moved the franchise company into the movie theater and bowling alley business — and away from a nationwide franchise roll-out, as promised); (7) the franchisor’s undisclosed strategic decision caused the franchisee to fail (according to the franchisee, with the company’s new direction, the franchisee was left […]

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Courts, Lawyers, Franchise Agreements, Right of First Refusal, Restrictive Covenant, Competing Franchisor all combine to Create the Efficient Free Market Outcome: “No Beer for Any Consumers at an Empty Restaurant.” Interestingly, from a law and economics point of view, the legal rules and process associated with this dispute have resulted in an inefficient outcome: unused restaurant space, unemployed workers, less beer being sold, and one fewer businesses paying taxes. http://www.heraldtribune.com/news/20170327/jdubs-dub-shack-beer-bar-closes  

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