Category Archives: Franchise Law

What is the franchise disclosure document?

The Franchise Disclosure Document (FDD) is a legal disclosure document which is provided to franchisee applicants interested in purchasing a franchise. The document is required by the Federal Trade Commission (FTC) and contains important information about the franchisor and the franchise system of which potential buyers should be aware prior to making the financial investment. It is intended to help prospective franchisees assess the potential risks and benefits involved in the relevant franchise.

Enforcement of Arbitration Clauses in Franchise Agreements

Arbitration is a proceeding that takes place outside of the court room. It essentially allows both the franchisor and franchisee the ability to take their legal disputes to an arbitrator who will, after hearing all the facts and evidence presented by both sides, come to a decision that is binding and enforceable by the courts.

What to Negotiate when Purchasing a Franchise?

It is important to understand that a franchise agreement is typically drafted in favor of the franchisor. That is because the franchisee will be granted the rights to use the franchisor’s name, brand, intellectual property, confidential information, services and products, such as, for example, custom recipes, manuals, services and products, system information, production knowhow, and/or other trade secrets of the franchisor.

What are the Minimum Performance Requirements in Franchise Agreements?

A minimum performance requirement is typically a provision in a franchise agreement that creates a certain minimum standard of performance that is necessary for a Franchisee to maintain in order not to be in default on the franchise agreement. Every franchise agreement will impose different standards on their franchise locations – some covering more areas of the franchise’s operations and some covering less.

What is a Third-Party Purchaser?

When most people think of foreclosures, the two parties instantly discussed are the owner that is being foreclosed upon and the bank that is doing the foreclosing. However, when the property is headed to the auction block there is another party that comes into the picture: third party purchasers. When the bank lists the property at the foreclosure auction, a third-party purchaser often decides to buy the property if he or she believes it is a good deal. Third-party purchaser can take strategic risks and make money through legal loopholes.

Updating your FDD in Response to Change of fees

The FDD must be given to the potential Franchisee 14 days before the Franchisee is able to sign the Franchise Agreement. The purpose of such disclosure to a potential Franchisee has historically been to allow the Franchisee to make an informed decision. An FDD typically includes a fees chart, the franchise’s legal and financial history, along with other terms and conditions of the operation of the franchise.

Can a Franchisee Sue a Franchisor for Item 19 Misrepresentations?

Item 19 disclosures are the disclosures that potential franchisees rely on the most when deciding whether to open a franchise. Thus, a franchisor needs to be careful to not make any overly robust financial presentations or promises. To begin with, a franchisor is not required to provide an answer to the most important question, “how much money can I make?”.

Financial Performance Representation AKA Item 19

Item 19 is an item on a Franchise Disclosure Document known as a “Financial Performance Representation.”

Dissolving a Delaware Corporation

Corporations lean on Delaware’s favorable business laws when it is time to incorporate their business. However, what happens when you want to dissolve your Delaware corporation?

What Are the Most Famous Franchises?

When you think of popular franchises you most likely think of fast food restaurants. Some of the most profitable and longest standing franchises in the United States are fast food restaurants such as McDonalds, Burger King, Wendy’s, Taco Bell and KFC.

What is the Difference Between Franchise Agreements and Franchise Disclosure Documents?

Joining the world of franchising can be a little overwhelming at first. First, you should know the difference between the Franchise Agreement (“FA”) and the Franchise Disclosure Documents (“FDD”).

What is an Accidental Franchise?

Failure to follow the formalities required under state law and by the FTC might unintentionally create a franchise agreement.

So You Want to SELL a Franchise?

While the sales process time consuming and varies significantly from franchise to franchise, you should generally consider the following steps when selling your franchise.

So You Want to BUY a Franchise?

Buying a franchise offers are variety of benefits, such as instant name recognition and a customer pool that is already familiar with and attracted to your products or services.

So You Want to START a Franchise?

If you own a successful business that is unique to you and are interested in expanding, franchising could be a great way to do just that.

The Importance of a Well Drafted Franchise Agreement

In Florida, there isn’t a specific statute that governs how a Franchise Agreement must be drafted. As a result, many unlawful acts and practices prompted the Florida Legislature in 1971 to enact The Florida Franchise Misrepresentation Act. However, The Act only offers limited legal recourse for victims of fraud and misrepresentation. This blog article identifies…   + Read More…