Legal

Consider these four fundamental questions when looking for a trustworthy business partner and you can achieve peace of mind and build a sound business.

You've just finished attending Discovery Day and you like what you've witnessed in this final installment of the franchise courting process. You've decided this is the franchise for you. You sit down with the franchisor at the end of the day and he brings the franchise agreement to the table.

Labor Secretary Alexander Acosta recently announced that he was withdrawing from the Obama administration's interpretation of joint employment.

Uncertainty is the bane of business. Although the regulatory environment of the past few years seemed bent on attacking the franchise business model, the early drama and politics of the incoming administration seem to be creating a new kind of uncertainty.

Politics, federal law, and franchisee assets. There are several significant steps that can be taken to help reduce estate taxes.

In January 2012, ICANN began accepting applications for new top-level domain names.

In the previous issue, I presented observations about defects I perceived in the U.S.'s system of franchise sales regulation. The essence of my position was that having duplicative regulation at the federal and state levels adds significant costs to the regulatory system--with little improvement in the regulatory environment.

Gift cards can be an important component of customer loyalty programs. They can help attract customers, driving sales and brand awareness. New federal rules governing the use of gift cards have recently gone into effect. You certainly should be aware of and comply with the new laws.

As I write this piece, it is a nostalgic moment for me: 37 years of practicing law, and all with the same firm. In today's environment, inertia in law firm employment is a rare thing. If I knew then what I know today, would I have gone into private practice?

One of the significant consequences of the Internet's development is that we can gather opinions from a diverse group with minimal effort. I did so recently through a posting on the American Bar Association Forum on Franchising listserv.

1. Should I make a financial performance representation (FPR)? Yes! Any type of representation, oral, written, or visual, that suggests or implies a specific level or range of actual or potential sales, income, gross or net profits qualifies as an FPR. You can't make an FPR unless it is in your franchise disclosure document (FDD). Between 20 and 30 percent of all franchisors make an FPR, which means some of your competitors share their numbers with your prospects. What impression do you leave if you don't share yours? If you have solid numbers, consider making an historical-based FPR. If you do, the law allows you to make specific written representations outside the FDD about a particular location or highlighting specific variables (e.g., a kiosk variation to a traditional retail format). Without an FPR, you may not make financial representations on your website (the first place prospects check in investigating a concept) or anywhere else.

After graduating from the University of Pennsylvania and Loyola Law School in Los Angeles, Danny Sonenshine quickly found himself working as a litigator and transactional attorney at major firms in Orange County. It didn't take long for the Laguna Beach native to realize a few things about himself--realities that led him to leave the practice of law after six years for the very different field of franchising and restaurants.

I was shocked recently while attending a workshop covering franchisee recruitment (formerly known as "franchise sales") by the participants' responses to the following situation: Assume that the franchisor says nothing in his Franchise Disclosure Document's Item 19 as to financial performance. Instead, the franchisor suggests that prospective franchisee prepare a business plan that would include a projection of revenues and costs for the proposed franchise.

You've done your research, you've assessed your own strengths and weaknesses, you've thoroughly evaluated the franchise companies that were a potential match for you, you've got your financing lined up, you've even jumped through a few hoops along the way, now comes the moment of decision. When it's time to commit and move forward with a franchise, you will be required to officially sign on. It's a big day and is often - but not always - marked by a Discovery Day held by the franchisor. Discovery Days are often meant to serve as final meetings that are typically held at the franchisor's headquarters or other corporate facility. Often, the franchisor will cover some or all of the costs of the incoming franchisee. After all, at this point, you've both been in regular contact and things look pretty serious. These events are usually fun, informal, and characterized by high energy and positive words. It's a final chance to talk one-on-one and, if both sides are in agreement, sign on with the franchise. But keep in mind that you are not obligated to "come aboard" at this time, and the franchisor also reserves the right to not extend an invitation at the end of the day. As a matter of fact, you may even consider attending two or three different Discovery Days to help you make your final determination of a franchise concept. That being said, here are some things you should know and do to prepare for attending a Discovery Day signing.

Getting to know a little more about you as a prospect is one of the first things franchises are interested in. The initial franchise application process is a screening mechanism by which franchisors begin to determine your interest and qualifications. Today, it is common to find initial franchise application forms on franchisors' websites - but most will be happy to send you one as well. This is a good stepping off point for beginning the communication process. You should not only take this very seriously, but also expect to spend some time gathering the information and completing the application.

Let's look at some recent trends. The stock market: trending downward. Franchise system sales: flat or downward in well over the majority of cases. Sales of new franchises: definitely on the downturn, almost dormant. How depressing!

Let's play Jeopardy. The answer: "Document!" The question: "What is the most effective way to minimize risk in the franchise sales process?" To be honest, my answer is a form of shorthand, but it succinctly makes my point.

There has been a growing trend in the world of franchising to tell candidates more about their earnings potential. Item 19 in the Franchise Disclosure Document (FDD) is the section that provides details on earnings, costs, and other factors likely to affect future financial performance after a candidate signs on to become a franchisee.

California has long been a key market for franchising. Its consumer-oriented culture has also made it one of the most active venues for regulatory and legal issues. Legal developments over the past year affecting the franchise community include 1)...

Many owners and operators have long realized that employees are one of the major assets in their multi-unit or multi-brand franchise business. Franchise operations usually have quite a bit invested in hiring and training its workers. A smart owner or operator knows that improving a business asset can reap rewards far exceeding the cost of any improvements made. Similarly, the value of people to your organization improves with investments in additional training and education.