(914) 265-4100. jl@lusthauslawpc.com

Franchise Matters

You’ve got a great business. You may even have a budding multi-store operation. You’re ready to move into the big time. Great! But one thing is holding you back: Cash. Or the lack thereof.

These days, restaurant consumers have come to expect convenience and are increasing their demand for delivery options. More and more, they are demanding speed and reliability. For restaurants in the business of food service, the issue of delivery can no longer remain on the back burner.

You have a successful business. You have a couple of partners and are operating under one of the following scenarios: When you and your partners started your company, you did not think you needed an agreement among the owners or a partnership agreement. So, you didn’t create one.

If you think you may have accidentally sold a franchise in violation of law, you will want to contact knowledgeable franchise counsel immediately as there may be severe consequences. Depending on the jurisdiction, the government can seek preliminary and permanent injunctions and impose civil penalties against the franchisor and you, the owner.

You are a successful restaurateur, managing and running multiple eateries in multiple locations for several years. You started with a single location. It opened and was a hit. So you opened a second restaurant in a different location which turned out to be just as popular.

You've just acquired a franchise and suddenly you are part of a much larger organization. Or are you? Are you one voice among many or are you an integral part of a cohesive, integrated group? How do you make your voice heard? Who do you call with questions? How do others in your organization get things done? Negotiate terms? Get the attention of the franchisor?

Visit the dairy counter of any supermarket and what do you see? Gallons of milk, cartons of yogurt, cheese, etc. Each carries a clearly marked price tag: $1.99, $0.75, and so on. What you don't see are the extra costs that show up when you check out at the register. Extra costs like sales tax, or, paper/plastic back fees charged in states requiring shoppers to bring their own grocery bags.

Buying a franchise? History matters. And in this instance, history means references. So check them out. Really. Checking references -- contacting others currently in your franchisor's stable, or who have left the franchise system for one reason or another is a key piece to avoiding post-purchase, buyer's remorse.

Neither federal nor state franchise laws prohibit franchisors from negotiating franchise agreements with franchisees. So, when the franchisor's salesperson says it is against the law to negotiate, they are...not telling the truth. Franchisors can always negotiate their franchise agreements and many do. But whether or not your franchisor will negotiate and to what extent, depends on many factors.

Sellers typically decide they want to sell. Sometimes they hire a broker as an intermediary. Sometimes they don't. But ultimately, for every seller, a buyer is found. That buyer investigates the opportunity proposed, makes an offer, and then the parties retain counsel to draft and negotiate an agreement. 


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