Tag Archives: Business Issues

Structuring a Multi-unit Franchise

A multi-unit franchise owner can structure its operations in a number of ways, but one approach in particular often makes a lot of sense: a developer entity that acts as the parent company for the individual franchise locations. First some background.  Many franchisors seek out franchisees who want to open three or more units. One approach is to sign a development agreement in which the developer commits to open an agreed-upon number of franchise units in a defined territory over a specified period.  In exchange, the franchisor agrees not to open a company-owned unit or to grant a franchise to …

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When are Parent Company Financial Disclosures Required?

A franchisor selling franchises in the U.S. must disclose its audited financial statements in Item 21 of the franchise disclosure document (FDD).  Sometimes, parent company financials are used instead of the franchisor’s financials.  This is easily done when the parent company is a public company that already has audited financials.  But most franchisors are not public companies.  They are not likely to have parent company audited financials and would prefer not to incur the added expense of auditing a group of companies rather than just the franchisor entity.  Audits are expensive.  The franchisor may also want to shield its parent …

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Franchisors Are Not Joint Employers

The National Labor Relations Board (NLRB) caused an earthquake in the field of franchising with the General Counsel’s announcement July 29, 2014, of complaints against McDonald’s USA, LLC.  The NLRB General Counsel (GC) authorized the issuance of complaints of alleged labor law violations against the franchisor as the joint employer with its franchisees.  Those who brought the complaints were employees of franchisees. The prospect of being jointly liable with a franchisee for a franchisee’s labor law violations is shocking to franchisors.  The NLRB GC’s approach is a radical change from more than 30 years of settled law that respects the distinct …

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Welcome to Franchise Alchemy

Welcome to Franchise Alchemy, a blog that magically transforms franchise business and law news into golden concepts.  Of course, we make no promises about the gold or the magic.  But we’ll do our best. We are lawyers at the national law firm of LeClairRyan.  We hope to make real contributions to the conversation with franchisors, franchisees and franchise consultants, and with legislators, judges, franchise law administrators and individuals and businesses considering franchising.  In sum, our audience is comprised of people in the franchise business and those who deal with franchise companies or simply have an interest in the subject. Why …

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