Franchise Transactions Need Proper Legal Representation

Carty Davis is a partner with a boutique investment bank and has experience with hundreds of transactions in the multi-unit franchise space. But he’s also an area developer for Sport Clips in North Carolina with more than 70 units.

Carty has noticed an extension of timelines for industry-related transactions over the past few years. Everything from multi-unit franchisee approval, franchisee-to-franchisee transfers, and private equity/family office investments, to refranchising and recapitalizations with both regulated and non-regulated capital providers.

He says time kills deals and longer cycles can expose transactions to franchisor approval sentiment, changes in lending conditions, and macro or geopolitical events. But he says the deal process can be handled with the right focus, time, and effort up front.

Here he discusses the importance of legal representation.

• Legal representation. When selling an asset that most likely is a substantial portion of your net worth and life’s work, hire an experienced franchise and/or M&A attorney, especially if they already have an existing client base within your brand. Depending on the type of deal, you can expect your attorney to be involved with the purchase and sale agreement, franchisor negotiations around territory rights and development requirements, loan documents, leases, and landlord consents. You need a true expert to guide your transaction through a process filled with time-delaying pitfalls and drama. Most likely they will know the key deal points and decision-makers at the brand level. Moreover, they will have current data on which funding sources helped clients make it to the closing table—and which ones threw up roadblocks that either caused transactions to stall or ultimately die on the vine.