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Jenny J. Liu’s Law Office

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Franchising is a business practice where a mature or proved business model with successful products or services is used   by another for fees.  The owner who has successfully developed the proved business model is called a franchisor.  The person or entity who invests money buying the franchise is called a franchisee.  The franchisor and the franchisee enter into a continuous contractual relationship where the franchisee pays the franchisor a license fee to operate the business under franchisor’s brand name, business image, and business model.  In a franchise relationship, in addition to the initial franchise fee and any such other initial investment, the franchisees are required to pay to the franchisor “royalties,” an ongoing payment usually each month.

 

 

For Franchisor:

 

Franchise sales are regulated at both federal and state levels.  The Federal Trade Commission (“FTC”) imposes certain requirements on the franchisors to satisfy before the franchisor may offer or sell the franchise.  Among others, the franchisor must provide the franchise candidate with a Franchise Disclosure Document (“FDD”) disclosing all important aspect of its franchise business including franchisor’s financial data so the franchise candidate may have sufficient information to analyze and evaluate the proposed franchise business.  The FDD must be updated each year.  Although the disclosure of existing franchisee’s earning data is not required, many franchisors make such disclosure to promote the sale.  Further, certain states require that the franchisors must file annual FDD registration in their sate to sell the franchises there.

 

As a franchisor, a careful preparation of the FDD each year is necessary to comply with the FTC rules as well as the franchise laws of the registration states.  Attorney Liu has extensive experience working with franchisors to draft, review, update the FDD and working with the state agencies to register the FDD in compliance with the state laws.

 

For Franchisees:

 

Franchises can be more feasible investment opportunities given the relatively mature business model and ongoing support of the Franchisor compared with entrepreneurs who usually need to invest their own time and effort to develop a business model that is profitable.  Being part of a franchise also offers a business image to be part of a developed brand that is already known to the customers.  In the meantime, it is important to carefully review the franchise disclosure documents and franchise agreements to have a good understanding what deal to go into and negotiate with the franchisor in favor of the franchisee before investment in the franchise business.

 

Attorney Liu has extensive experience working with franchise candidates to review the franchise disclosure documents and proposed agreements as well as negotiating with the franchisor in favor of the prospective franchisees.
 

Franchise transfer/sale:

 

When a franchised business has been operated for a period of time, goodwill and/or value may be added to the initial investment.  Sale and/or transfer of the franchise business may be a good exit for the initial franchise investment by a franchisee.  Attorney Liu is experienced assisting a transfer / sale of franchises.

 

Franchise Dispute and Resolution:

 

Alternative Resolution:In many cases, dispute between a franchisee and a franchisor may be resolved in an amicable manner without litigation.  This can save clients substantial legal costs in court and alike legal proceedings.  Attorney Liu is experienced in representing clients resolving the disputes arising out of the franchise agreement through alternative resolution.

 

Litigation:Attorney Liu represents franchisors and franchisees in dispute arising out of franchise agreements in both state courts and the United States District Court for the District of Massachusetts.