Vinson Franchise Law Firm represents existing U.S. franchisors on a nation-wide basis in connection with all types of franchise legal matters and transactions, except formal dispute resolution proceedings (such as litigation and arbitration).
We regularly assist established franchisors with:
Annually updating the FDD (as required by law)
Updating the FDD and form agreements to reflect changes to the system or changes in laws
Improving the FDD and form agreements
Filing state registration and exemption applications and renewals
Filing franchise advertisements
Advising on negotiating changes to franchise agreements
Advising on encroachment, co-branding and other franchise law issues
Handling the enforcement of system standards, franchisee defaults, terminations, and non-renewals
Advising on franchisee transfers and buy-backs
Correcting unintentional violations of franchise law
Reviewing franchise operations manuals
Buying or selling franchise systems
Implementing alternative channels of distribution
Converting license-based business models to franchise systems
Implementing major system changes
Negotiating disputes with franchisees
Each franchisor must update its franchise disclosure document (FDD) at least once per year -- within 120 days after the end of each fiscal year. For franchisors with a December 31 fiscal year end, this means updates must be completed by about April 28 each year.
If there are any material changes to the information in the FDD during the course of the franchisor's fiscal year, then the FDD will need to be updated even sooner than the year-end annual update. Information is considered to be "material" if a reasonable prospective franchisee would consider that information important when making a decision whether or not to buy a franchise.
Revisions to FDD to Reflect Changes
Franchise systems typically change over time – especially during the early years. The initial training program and other initial and on-going support typically get refined during this period. The franchise agreement and FDD need to be updated regularly in order to keep pace with the evolving franchise system. This could be important to help protect the franchisor's legal rights and remedies, and to prevent unnecessary claims by franchisees.
Additionally, society, laws and the marketplace change over time. For example, Internet rights and obligations and social media usage were rarely addressed in typical franchise agreements a decade ago, but are now important features in many franchise systems. As states have become more aggressive in seeking tax revenues from out-of-state franchisors, the tax provisions in the franchise agreement have become more important. Federal legislation such as the E-SIGN Act and the Federal Arbitration Act also affect relevant provisions in most franchise agreement. Franchisors in competitive industries may also need to adjust their franchise systems to maintain their competitive position for new franchisees.
Improvements to Franchise Documents
Some existing franchisors hire Vinson Franchise Law Firm to improve their legal documents that were originally prepared elsewhere. Your existing franchise documents probably could use an overhaul if any of the following apply:
Prospective franchisees are reluctant to sign your franchise agreement because they do not understand it.
There are parts of your franchise agreement that even you or your sales staff do not understand.
Your FDD and form agreements have not been updated within the last year.
Your franchise documents were prepared by a non-lawyer, or a general practice lawyer.
You notice that issues that commonly arise with your franchisees are not adequately covered by the franchise agreement.
Your FDD and franchise agreement do not fit with the look, feel, and style of your system.
You use a complicated set of separate state-specific FDDs or addenda instead of a unified document for use in all states.
Your franchise agreement is in legalese.
There are no legal reasons for franchise agreements or FDDs to be in legalese. Unfortunately, most lawyers still use archaic terminology and complicated sentence structures in legal documents. This makes the documents difficult for non-lawyers to understand and follow. If you, your staff, or your franchisee prospects are having difficulty understanding your franchise agreement, you should seriously consider having the document rewritten in plain English.
State Registrations & Exemptions Applications & Renewals
We assist existing franchisors in filing state registration and exemption applications and renewals. Most state franchise registrations and exemptions are valid for only a year.
In order to maintain the registration or exemption in these states, certain documents need to be filed before the filing deadline (which may be 30 days or more before the registration actually expires). These documents usually include at a minimum registration renewal forms, an updated FDD (clean and red-lined showing changes), and, of course, a filing fee.
We are often able to streamline this process by consolidating a franchisor’s various state registration and exemption renewal dates so that they all fall during the same calendar quarter.
Filing Franchise Advertising
Vinson Franchise Law Firm assists existing franchisors in filing their franchise advertisiements. Some states have laws that require franchisors to file with the state franchise regulators a copy of all advertising materials before they are used in the state. These laws apply to advertising relating to the offer of the franchise opportunity, and not to advertising of the products or services you and your franchisees provide.
Fixing Unintentional Violations of State Franchise Laws
We assist existing franchisors to deal with situations where there has been an unintentional violation of state franchise law. This most often occurs when a franchisor sells a franchise in a registration state without first registering the franchise in that state. Ignorance of the law is not a valid legal excuse. All franchisors are presumed to know the law.
When a franchisor realizes its error, it should immediately notify the franchise regulators in the relevant state. The state regulators are more lenient with franchisors who turn themselves in.
Generally, the regulators will direct the franchisor to offer rescission to the affected franchisee. Rescission is the legal term for undoing the deal. If the franchisee chooses to accept rescission, the franchisor would reimburse the initial fee, the franchisee would stop using the franchisor’s marks and system, and the franchise agreement would be treated as if it never existed. State regulators may also impose fines or other penalties in this situation, or even require the franchisor to attend training on how to comply with franchise sales legal requirements.
We help minimize the negative impacts of this process on existing franchisors.
Negotiating Changes to the Franchise Agreement
We assist existing franchisors when they desire to negotiate changes to the franchise agreement for a prospective franchisee (which we usually do not recommend). Most of the provisions in the franchise agreement are designed to protect the franchise system in general and the franchisor in particular. Therefore, modification of these provisions should not be undertaken without full consideration of the effects of the proposed changes.
Our assistance with negotiated changes usually deals with 3 issues:
1. Proper Drafting
Proper documentation of the negotiated changes can be very important in preserving the franchisor's other rights and remedies. Our involvement helps insure that the negotiated changes do not accidently interfere with other contractual rights and obligations.
Some states have laws that prohibit franchisors from discriminating among its franchisees. These laws generally prohibit a franchisors from treating one franchisee in the state differently than a similarly-situated franchisee in the same state.
3. California's Negotiated Changes Law
California has a law that requires franchisors who negotiate changes with franchisees to: (a) file a notice with the state describing the negotiated changes; (b) amend its offering circular to disclose that the franchisor has negotiated changes to the standard offer; and (c) provide a copy of the notice to all franchisee prospects in California for the next 12 months.
Encroachment & Co-Branding
Encroachment refers to the situation when a franchisor opens a company-owned unit or allows a franchisee to open a franchised unit near another franchisee’s unit. If the franchisee with the first unit suffers economic harm as a result of the opening of the new unit, that franchisee may have a claim against the franchisor for encroachment. Encroachment can also be caused by a franchisor selling goods or services in a franchisee’s territory through non-franchised channels of distribution. Proper drafting of the franchise agreement and FDD will close off the possibility of most of these types of claims. But, occasionally we assist existing franchisors in dealing with encroachment issues.
We assist existing franchisors in developing and documenting co-branding arrangements. Co-branding refers to the arrangement where one or more franchisees operate 2 or more franchises at the same location. An example of co-branding is a gas station that includes a fast food restaurant inside. Because of the fact that certain areas, equipment, employees, supplies and responsibilities may be shared among the multiple franchises, co-branding arrangements are more complicated than ordinary franchises.
Enforcing Standards, and Franchisee Defaults, Terminations & Non-Renewals
The franchise agreement and franchise operations manual are designed to help franchisees understand and follow the franchisor's system. Often, a franchisee who is failing to follow the system can be brought back into compliance following notice or further training by the franchisor. But, there will be times in every franchise system when it becomes necessary for the franchisor to take more formal steps to enforce its system standards against a non-complying franchisee. Vinson Franchise Law Firm assists existing franchisors with these issues.
Many states have laws that restrict when a franchisor can terminate or not renew a franchise agreement. These laws typically require "good cause" for termination or non-renewal, and the statutes often specify the kinds of defaults by the franchisee that are considered to be good cause. These laws usually also specify how much notice needs to be given, and how many days the franchisee has to cure the problem. These state laws supercede the provisions of the franchise agreement. We assist existing franchisors with notices of default, notices of termination, and non-renewals.
A franchisor’s failure to comply with state law may make the franchisor’s termination or non-renewal efforts ineffective, or, worse, may give the franchisee a legitimate claim against the franchisor for wrongful termination of the franchise agreement. It is essential that a franchisor check applicable state law (or consult with an experienced franchise lawyer) before taking any action against a franchisee relating to any default, termination or non-renewal.
Franchise Transfers & Buy-Backs
When an existing franchisee desires to transfer the franchise to a transferee, the franchisor has a keen interest in making sure that franchise transfer is properly handled. Franchise transfers can take the form of asset sales or stock sales. The franchisor typically has the contractual right to approve or disapprove of the transfer and the terms of the transfer (for example to make sure that the transferee is not saddled with excessive debt that cannot be serviced by the franchised business revenues). The franchisor may also want to review the transfer documents to make sure that the franchise rights and the related assets of the franchised business are properly assigned to the transferee. We assist in facilitating franchise transfers.
We also help existing franchisors in situations when the franchisor desires to purchase a franchised business from one of its franchisees. This sometimes occurs in the settlement of a major dispute between franchisor and franchisee. In this situation, it is important to make sure that the franchisee actually assigns to the franchisor all of the necessary assets involved in operating the franchised business.
Review of Franchise Operations Manuals
For complete drafting of new franchise operations manuals or re-writes of existing franchise operations manuals, we refer clients to FranMan, Inc., of which Rob Vinson is a part owner. Please see www.franman.net.
In order to reduce or eliminate serious legal risks arising under poorly-drafted franchise operations manuals, we review franchise manuals for existing franchisors. Please see Franchise Manuals.
Buying or Selling Franchise Systems
The buying and selling of any ongoing business (whether in the form of an asset sale or a stock sale) can be quite complicated. This is even more so for the buying and selling of a franchise system, which involve important intellectual property rights, existing franchise agreements, existing supplier agreements, and ongoing long-term business relationships.
Vinson Franchise Law Firm assists buyers and sellers of franchise systems in handing the purchase or sale of franchise systems, including the due diligence investigation, negotiating and documenting the letter of intent, negotiating and documenting the sale agreement and the myriad of other legal documents involved in the transaction, notification of franchisees, and amendment or re-filing (as necessary) of state registration and exemption applications.
Alternate Channels of Distribution
Disputes with franchisees may arise when an existing franchisor begins to offer items or services through alternate channels of distribution which may arguably be in competition with its franchisees. However, when these issues are addressed ahead of time, the franchisor is often able to develop an equitable arrangement that is "win-win-win" for the franchisor, franchisees, and customers. We assist existing franchisor in considering the issues and developing equitable solutions in these situations.
Converting License-Based Systems to Franchise Systems
We assist existing licensors to convert their license-based systems into full-fledged franchise systems. Often, the licensed systems are actually franchise systems in disguise, but they are not in compliance with franchise law. The conversion of the licensed system into a franchise system offers a mechanism by which the licensor can come into compliance under franchise laws, which has the effect of significantly reducing the legal exposure of the licensor to potential claims by state regulators and its licensees for previous violations of franchise laws.
Major System Changes
We assist existing franchisors when the existing franchise system goes through a major change. Examples of major changes include when a restaurant concept begins offering delivery or "express" locations, or when a service franchise changes the business model for compensation and fees. These types of changes usually require careful planning by the franchisor and often they require extensive negotiating with a committee of franchisees before implementation. The implementation itself often requires revision of the FDD, amendment of any state registration, re-disclosure to existing franchisees, and the signing of new franchise agreements or addenda with existing franchisees to reflect the major system changes.
Most disputes between franchisors and franchisee are resolved without litigation, arbitration or formal mediation. We povide legal counsel to existing franchisors regarding these types of disputes, and help negotiate favorable settlements for our clients.
If the dispute cannot be resolved without litigation or arbitration, we can recommend experienced franchise litigators just about anywhere in the U.S. Or, we can provide your own local litigation lawyer with specialized education on the relevant franchise law issues.
How We Charge for Our Services
State registration and renewal services are offered at a fixed fee of US$300 or US$600 or US$900 per state, depending on the state.
The US$300-states are Connecticut (if your mark is federally registered), Florida, Kentucky, Michigan, Nebraska, Texas and Utah.
The US$600-states are Connecticut (if your mark is not federally registered), Hawaii, Indiana, Minnesota, North Carolina, North Dakota, Rhode Island, South Carolina, South Dakota and Wisconsin.
The US$900 states are California, Illinois, Maryland, New York, Virginia and Washington.
This fixed fee does not include state filing fees (which range from US$0 to US$750 per registration state), or postage or delivery services (which can be up to US$60 per state depending on the weight of your registration materials and the delivery method). Unlike most law firms, we do not charge extra for photocopying costs associated with state registrations, which can be substantial because of the number of pages involved.
For review and comment on existing franchise documents prepared elsewhere, we are usually able to quote a fixed-fee price after we have seen the franchise documents. The same is true for major improvements to, and complete re-writes of, existing franchise documents.
For most other services for existing franchisors, we charge our standard hourly fee.
Other Resources for Existing Franchisors
The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. It's web site contains a wealth of information about franchising.
See Blue MauMau for informative articles, lists and rankings for the franchise industry.
Entrepreneur Magazine's Franchise Zone includes articles and other information on the franchise industry.
Licensed in California, Nevada and Texas. Not certified as to any specialty by any state bars.
This web site provides general information only. Laws differ from state to state, and they change over time. Nothing included in this web site should be construed as creating an attorney-client relationship, or as the provision of legal advice.
Links to other web sites are provided for your convenience and information. They are not intended to be endorsements. Third-party trademarks and service marks used in this web site belong to their respective owners.
All contents copyright 2002-2017 Robert E. Vinson, Jr. All rights reserved. The information contained in this web site may not be reproduced, downloaded, disseminated, published or transferred in any form or by any means, other than downloading for personal use, except with prior written consent of Robert E. Vinson, Jr.