AboutFranchise Attorney Franchise Expert MBA - Kevin B. Murphy - Mr. Franchise & Former Franchise Owner Expertise Franchise Attorney, MBA Franchise Expert, author and instructor with 2-plus decades of franchise industry experience, including ownership of a successful franchise. I answer all business format franchise questions, how to franchise a business, issues about ongoing franchise relationships, buying a franchise, evaluating franchise investments, franchising vs. licensing (franchise vs. license), franchise disputes, franchise operations manuals, franchise expert advice in franchise lawsuits and franchise litigation, franchise agreements, FDD Franchise Disclosure Documents and intellectual property. I don't answer questions about franchises in the automotive and petroleum industries. I have drafted, reviewed and negotiated over 500 franchise disclosure documents, advised hundreds of franchise buyers and franchise companies as well as started and operated a franchise from scratch - a background not duplicated by any other franchise expert. My in-the-trenches franchise ownership and resale experiences gave me valuable insights to share with potential franchise buyers and existing as well as emerging franchise companies.
Experience Known in the industry as Mr. Franchise, I owned, operated and sold a very successful franchise in the home improvement industry. I help individuals and companies enter and prosper in the franchise industry, have drafted, reviewed and negotiated over 500 FDD's (Franchise Disclosure Documents) and have experience filing franchise registrations in all franchise registration states such as California, Illinois, New York, etc. I am very familiar with the McDonalds franchise program, have developed a cost-savings franchise budget for companies that want to learn how to franchise a business, and pioneered a unique FDD Evaluator program for those considering a franchise investment.
Publications Author of over 40 franchise articles, including four books on franchising and one book on trade secrets.
Avoiding Legal Pitfalls In Franchise Marketing
2009, Franchise Foundations Press
Franchise Sales Control
2009, Franchise Foundations Press
Awards and Honors Selected as the premier U.S. franchise expert by the World Intellectual Property Organization (WIPO), an agency of the United Nations, in Geneva, Switzerland to speak at Singapore’s World Conference about franchising in Asian countries and developing uniform franchise regulations based on the U.S. franchise laws and regulatory model, September, 2007, hosted jointly by WIPO and the Intellectual Property Office of Singapore (IPOS).
Snapshot of Recent Franchise Expert Litigation Cases:
Nagrampa v. MailCoups Inc. and The American Arbitration Association - United States Court of Appeals for the Ninth Circuit (Argued and Submitted En Banc). Summary: provided franchise expert strategy and consulting in a case that established new franchise law by invalidating the standard arbitration provision in a California franchise agreement on the grounds it was unconscionable.
Swansons Cleaners, et al. (Superior Court jury trial). Summary: provided franchise expert consulting that re-focused the legal issues and discovered new causes of action. Testified at deposition and trial for a franchisee in its claims against the franchise company. Result: jury verdict in favor of the franchisee for $1.6 million in punitive damages and $634,000 in contract, etc. damages.
Question My franchise is not doing well. It is in the retail arena. It is an s corp in state of nj. I want to find out my options on getting out before it is too late. Can I get out of machine and rental space lease agreements. Can they go after my personal property, the machine leases required a personal guarantee? What are my options? Thank You!
Sorry to hear about your predicament. Your question addresses a number of topics, many of which are non-franchise related. The first issue is your franchise agreement. Before you do anything with machine and rental space agreements, etc. the franchise company may have rights of first refusal and there's probably another provision that you cannot encumber any assets or attempt to dispose of them without notifying the franchise company. So, first thing on your list is to show your franchise agreement to a franchise attorney so you can understand your legal rights and obligations as a franchise owner.
Next issue is why your franchise is not doing well. Is it because you're way overextended, spending much more than the high end total disclosed in Item 7 of your FDD (formerly called a UFOC)? If that's the case and it's not your fault, you may be able to look to the franchise company for reimbursement of some or all of your investment as well as contractual obligations (like the rental and other leases) you entered into based on what was represented to you in the FDD. Here, you need to show your contract and FDD to a franchise expert. You can find out about franchise experts at:
Normally real property leases (like your rental lease) require a personal guaranty, even if you signed on behalf of your S corporation. You need to look into this aspect. If you've signed personal guarantees, then you're on the financial hook individually. The only way to get out of these (assuming you're not successful in efforts to make the franchise company liable for the obligations) is to file for bankruptcy. Or, in the case of the rental lease, waiting for the landlord to find another tenant who will take over the space for the same term and rent. Even if that happens, the landlord will keep you on the hook for the balance of your term if the new tenant ever fails to pay. Hard to get a good night's sleep under these circumstances.
Another option is to try and sell your franchise to a third party. But that's going to be a hard, if not impossible task if the business isn't doing well. On the other hand, franchises that are not profitable are sold all the time to buyers who think they can turn things around.
It's too bad you didn't go into this with a pre-planned exit strategy in case things didn't work out. You could have done a lot at the before signing and financial commitment stage to avoid or minimize the problems you are now facing. Too many franchise buyers make impulsive, emotional decisions, buoyed by smooth-talking franchise salespersons who present themselves as their friends.
Good luck, and if you have any further questions, contact me directly through the Franchise Foundations website, using the franchise attorney page.
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