Tag Archives: Entities

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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Why Locate Your Business in New York?

New York is a great place to live and do business. The state is running an active marketing campaign to let the world know and to attract new business to the state. But while on the one hand New York is looking to bring new businesses to the state, on the other hand New York’s laws push businesses away. The New York franchise law is just one example, as discussed in an earlier blog post. This post is about the laws that make the largest owners of a New York closely held corporation personally liable for employee wages. I wrote …

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How to Bring a Franchise Brand to the US

What’s the best way for a successful franchisor outside the U.S. to launch its brand within the U.S.?  Here is one suggested approach: Start small.  Begin with a test. See what works and what doesn’t work.  What are the costs?  What are the best sources of supply?  Who are the competitors and what do they offer?  What prices make sense?  What local talent can join the venture and bring U.S. industry expertise?  A test will allow the brand owner to modify the system to meet the challenges of the market and then to offer a proven concept when prospective franchisees …

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