Franchise Law Legal Questions

I suggest you not quit your job until you have an experienced lawyer review any covenants not to compete in contracts you signed,  the territory of those covenants, and the reasonableness of those covenants.  I also suggest that you not take any customer lists or unpublished data or material in your possession even if you created the data or material.... Read More

Depending on the situation, it may be possible. However, it may also be possible to overturn the default judgment. Further, it could be interpreted that the trust could only sue through the company and thus should have brought its claims in the initial suit, which already has a judgment.  ... Read More

A franchisor must deliver to a prospective franchisee its current Franchise Disclosure Document at least 14 days before the franchisee signs any agreement with the franchisor or pays the franchisor any money.  Most franchisors have a pre-sale process that you must go through before most franchisor delivers the FDD to you.  Once you get the FDD, the 14-day period is only a minimum period of time.  You will want to review it, retain a franchise attorney to review it and negotiate changes, retain an accountant, prepare a business plan, line up your financing if necessary,  and perform your due diligence including visiting as many operating franchised businesses as you can.  This can be lengthy process but the franchisor should be assisting you with it.  ... Read More

A business gains rights in a trademark through use.  If you are using a trademark in Texas, but not in other states and there is no effect on  interstate commerce, then you can register the trademark with the Secretary of State of Texas.  The filing fee is $50.   If you are using the trademark in interstate commerce, then you can register the trademark with the United States Trademark Office.  The cost of registration is either $275 or $325 depending on how you file the application for registration.  You may also incur legal fees of any where from $500 to $1,000 if you hire an attorney to make the application to register the trademark for you. If someone else is using the same or a similar trademark on goods or in connection with services that are the same or similar to your goods or services, and if they used it before you used it, then the other person has superior rights and can stop you from registering your trademark.  The other person may not have registered the trademark, but registration is not necessary to earn and to claim rights in a mark.  All that is needed to own a trademark is to use the trademark on goods or in connection with goods or services in a business.  The first person to use the trademark owns the trademark for those particular goods or services and can keep others from using the trademark if there is a likelihood of confusion about who is producing or selling the goods or services. I am an attorney licensed to practice law in the State of Ohio and I am not licensed to practice law in the State of Texas.  This communication is intended to give general legal information and is not legal advice to you based on your specific situation.  No attorney client relationship is created by this communication.... Read More

It sounds like you and your boss had an oral contract, but not a written one.  In most states, oral contracts are enforceable if they do not violate the statute of frauds in that state. In Ohio (I am not licensed in Kentucky where you are located; you will have to find out the Kentucky law on this matter of statute of frauds), a contract is enforceable even though it is not in writing UNLESS it will be performed in more than one year, or it is for the sale of real estate.  In your case, it appears that your contract to purchase a franchise was not able to be performed in less than one year, so the oral contract may not be enforceable. Another problem with oral contracts is that there are terms not stated in the original understanding, so it is not clear exactly what was promised. For example, in your situation, was there a promise that you would open the next granted franchise?  Or just that you would be able to open a franchise, at some time?  Was any time limit expressed?  There are ways to enforce a contract that may be voidable because of statute of frauds issues if partial performance has begun.  It appears that you changed your employment in reliance on your boss's promise to grant you a franchise, and therefore you performed part of your part of the bargain.  This doctrine is also called justifiable detrimental reliance.  You relied on your boss's promise.   There are several theories available to you to permit you to recover damages or to obtain a franchise in a lawsuit against the company, or against your boss.  You must consult an attorney to represent you and to determine after hearing all the facts of your case whether you can succeed in a lawsuit to obtain what you want - a franchise agreement with the company. In addition to contract questions, in the sale of a franchise, a prospective franchisee must be given a Franchise Disclosure Document that complies with federal franchise law.  If your employer is not complying with federal franchise law, then any franchise your employer grants is subject to rescission by the franchisee and in addition, your employer may be opening itself up to violations of state law in the sale of its franchises. I am an attorney licensed to practice law in the state of Ohio.  I am not licensed in the Commonwealth of Kentucky or any other state.  This answer is intended to give general legal information and is not intended to give legal advice on your specific situation.  More information would be needed in order to advise you on your specific situation.  No attorney client relationship is established by my answer to your question.... Read More

When a business owner decides to become a franchisor, that means the business will license its trademarks, menus, the look of the business, the operating manual and operating processes to unrelated business owners who will open the same business at a different location.  There are both state and federal laws that govern franchising.  New York requires you to complete the requirements stated by the United States Federal Trade Commission ("FTC") in its Amended Franchise Rule.  The Rule and other publications may be accessed on the internet at http://www.ftc.gov/bcp/menus/resources/guidance/franchise.shtm (cut and paste this link into your browser, or go to www.ftc.gov and search for "franchise"). The federal rule known as Amended Franchise Rule requires businesses that want to sell franchises to comply with a complex list of disclosure requirements in a Franchise Disclosure Document.  15 states also regulate the sale of franchises, and many of those states have specific additional requirements for the Franchise Disclosure Document and Franchise Agreement.  One of the things you have to supply to prospective franchisees is financial statements from your operating business, and another thing you have to disclose is how much it will cost the franchisee to open the new business, including all costs such as the lease, the equipment, advertising, training, inventory, food supplies, insurance, permits and licenses, employee pay and so on.  After the franchisor complies with these requirements and sells the franchises, the franchisor is not the owner of the new franchisee restaurants.  However, the franchisor may collect fees from the franchised restaurants including an up-front fee to cover costs, and a continuing royalty on the franchisor trademarks and business systems.  The franchisor may decide to require that the franchisee sell the business to the franchisor if the franchisee goes out of business or wants to sell. Franchising is a very complex business that requires legal and accounting assistance.  Consult the Federal Trade Commission website www.ftc.gov for a publication about buying a franchise as well as for publications about selling franchises. I am an attorney licensed to practice law in the state of Ohio and I an not licensed to practice law in the state of New York.  This answer is intended to give general legal information and is not specific to your set of facts.  No attorney client relationship is established by this answer to your question.... Read More

A franchise is a contract and is binding like any other valid contract.  If the franchisor complied with federal and California franchise laws when it offered to sell you the franchise, then most likely the Franchise Agreement is enforceable.  Many franchise agreements state that they last for a certain number of years, and that the franchisee owes the franchisor the franchise fees for the entire term of the franchise agreement in the event the franchisee breaches the franchise agreement or in the event the franchisee terminates the franchise agreement early before it is supposed to end.  You need to consult an attorney to determine whether the franchise agreement complies with California and federal law, and whether the franchise disclosure documents complied with federal and California law.  In some cases, the franchise agreement can be held to be fraudulent, and in that case you would be released from future payments.  In other cases, the franchise agreement will be held to be valid and can be enforced, even if it requires future payments.  In many cases, the franchisor will negotiate a settlement with a franchisee who goes out of business.   I am an attorney licensed to practice law in the State of Ohio and I am not licensed to practice law in the state of California.  This answer is intended to be general information and does not constitute legal advice on your particular set of facts.  No attorney client relationship is established by this answer to your question.  ... Read More

There are no state or federal laws requiring a franchisor to tell a franchisee why the franchisor was denied a franchise.  The franchisor may do business with anyone that it wants to do business with and may reject a person's application for any reason.  However, the franchisor has to follow the standards it set out in the Franchise Disclosure Document and in the Franchise Agreement for returning or not returning the franchise fee or any other fee the applicant previously paid to the franchisor. Verified Credentials, Inc. is not a credit rating agency.  It appears from your question that this company  performed investigation services for the franchisor, but they must have requested your credit report from Transunion, which is a credit reporting agency.  You can obtain a copy of your credit report from Transunion, Equifax or Experian, and any of these three agencies will tell you what inquiries have been made on your credit report. I am an attorney licensed to practice law in the State of Ohio and I am not admitted to practice law in the State of New Jersey.  This answer is intended to give general legal information and does not constitute legal advice on your particular situation.  No attorney client relationship is created by my answer to your question.... Read More

Under federal law, persons selling franchises have to furnish a franchise buyer with a Franchise Disclosure Document that meets detailed disclosure requirements prescribed by federal regulation at least 10 days before the franchise buyer gives any money to the franchise seller.  If the business arrangement you entered into qualifies as a franchise, then this franchise seller has violated the federal franchise laws.  Unfortunately, there is no private right to sue the franchise seller under the federal laws.  Some states give franchise buyers the right to sue the franchise seller for violating the federal or state laws on franchising, but Texas is not one of them. Your remedy under the federal franchise laws is to file a complaint with the Federal Trade Commission in Washington, DC, and the FTC may investigate this franchise seller.  However, you may have the right to sue the franchise seller under a breach of contract claim since contracts do not have to be in writing.  It depends on what you agreed to in the 1-page business opportunity statement your signed.  There may also be a business opportunity law in the State of Texas that could give you a right to sue this franchise seller.  You should consult an attorney licensed to practice law in the State of Texas to find out if you have any way to sue the franchise seller to get your money back.  Your rights will also be affected by any other written agreements you signed. I am an attorney licensed to practice law in the State of Ohio and I am not admitted to practice law in Texas.  This answer is intended to give general information on federal franchise law and not to advise you specifically on your legal rights.  An attorney advising you on your legal rights against this franchise seller will have to review all the documents you signed or that were given to you.... Read More