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Brand Management

Feature Story:

Does It Matter How You Own Your Franchise? »

By Richard S. Mulligan

A State of Washington Appellate Court ruling (Marte v. Hernandez, May 16, 2011) demonstrates that deception can cause even blood relationships to disintegrate.
In this case, two brothers formed a partnership and purchased two McDonald's franchises. McDonald's does not sell franchises to partnerships. It sells franchises only to individuals or to entities wholly owned by an individual (both the equity interests and any interests in profits). To avoid McDonald's requirements, only one of the brothers applied to McDonald's as a franchisee, while the other was a financial investor and partner providing a portion of the money needed to purchase the franchise and fund the initial operating costs. The brothers concealed the existence of the partnership and further misrepresented the purpose of the investor brother's financial contributions to the partnership...

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