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Structuring a Refranchising Program
As used in this article, “refranchising” means the sale of company-operated units to purchasers who become franchisees operating the units as franchise stores. Frequently the franchisees will also purchase the right/obligation to develop additional stores pursuant to a development agreement, thus increasing the upfront revenue to the seller or franchisor and providing for the construction of new units at the expense of the new franchisee. The sale may also involve the obligation of the purchaser to remodel the purchased units, once again allowing the seller or franchisor to achieve an overall upgrading of its units using the cash of the buyer, rather than its own resources. Ideally, the royalty revenue from the newly franchised units will replace the cash flow and profits lost from ceasing to operate the units as company stores, while the purchaser's or franchisee's new development will ultimately increase revenues. Sales proceeds and exclusive territory fees and development fees received at closing can be used to increase current earnings, reduce debt, and free up lines of credit for additional company store development in other markets.
There are several things that a franchisor can do in structuring its refranchising program to reduce the likelihood of disputes and litigation. This article discusses the presale market identification and internal due diligence and initial marketing process that culminates in the execution of a letter of intent (“LOI”).
Most disputes between parties are attributable to poor communication, leading to misunderstandings about the terms of the sale and the assets being sold. The seller must carefully control who has the authority to and who actually communicates with the buyer; the nature of the communication; and the monitoring of the buyer's due diligence process. The buyer will review the seller's financial statements to determine the historic performance of the franchise. The buyer also will review the condition of the franchise and any contract arrangements affecting its value.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Anti-Assignment Override Provisions
UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?