Late 2016 Regulatory Update – E-Filing and Risk Factors

As we approach the end of the year, it’s time to start preparing for 2017 FDD updates and the submission of state registration applications.  Every year, the franchise registration states make substantive and procedural changes that affect this process, and franchisors and franchise attorneys that stay on top of these changes are better positioned to minimize the time that it takes to get registered. In a previous blog post, we

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Delayed Revenue Recognition — A New Threat to Franchisor Financials

A recent change in Federal Accounting Standards Board (“FASB”) guidelines threatens to alter the way in which franchisors can recognize initial franchise fees in their audited financial statements.Historically, franchisors have recognized the revenue from initial franchise fees as an asset upon the opening of the franchised unit, as accountants view the initial franchise fee as consideration for the franchisor completing its pre-opening obligations. Until opening, the initial franchise fee would

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Franchisors – Time To Prepare For Your Fiscal Year End

As you wrap up sales activities this fiscal year and begin preparing for an audit of your 2016 financials, we think it is important to keep in mind capitalization requirements imposed by state regulatory authorities and the effects of last minute sales on the company’s financials so that the company can avoid impound conditions or other delays in registration caused by inadequate capitalization.  Below is a brief summary of capitalization

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Comments to the Commentary: Fisher Zucker’s Response to NASAA

As we mentioned in a previous blog post, the North American Securities Administrators Association (“NASAA”) published a notice of request for public commentary regarding financial performance representations (“FPRs”) that franchisors disclose within Item 19 of their franchise disclosure documents (“FDDs”).  The request by NASAA was a follow up to a similar request they made a year ago.  In both requests, NASAA has sought feedback from the public regarding a proposed

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What Strategic Buyers and Private Equity Firms Value Most When Looking at Your Franchise

What Strategic Buyers and Private Equity Firms Value Most When Looking at Your Franchise

Even if your franchise is in its nascent stages, it is not too early to organize your business for a strategic buy-out or for an infusion of private equity in the future. This is not to say that a budding franchise would be able to enter into such an agreement before proving itself; rather, much of what investors look for can be cultivated early on in the business and are

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The Third Circuit is Opening the Doors for Franchisees to File Class-Actions Under the WPCL

The Third Circuit Court of Appeals recently affirmed a lower court’s decision to permit a group of franchisees to file a class action lawsuit against a franchisor; a decision that could potentially lead to franchisees being deemed employees of a franchisor. In the matter of Darryl Williams; Howard Brooks v. Jani-King Of Philadelphia Inc., et al., No. 15-2049 (3d. Cir., September 21, 2016), two Philadelphia area Jani-King franchisees brought claims

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Onboarding New Franchisees

The onboarding process often comes down to the franchisor attempting to pack as much information as possible into the training session and overwhelming the franchisee. In order to have a less frustrating and more meaningful orientation process, however, onboarding should begin as early as the recruitment stage. This includes imparting the vision and the culture of the business upon prospective franchisees early on, as well as managing their expectations. Transparency

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Making Sure Your Opportunity is Bankable

One of the most repeated pieces of advice given to emerging franchisors is to make sure that the first twenty franchise units have as few financial problems as possible. The strength or weakness of the initial franchisees will be what the franchisors will be reporting in their Item 19’s for years to come, and it has enormous long-term impact on the value of the brand. It can ultimately impact future

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Technology Solutions for Emerging Franchisors

Some of the more difficult decisions facing emerging franchisors involve technology — the level of development needed in the early stages of growth; which types of systems to tackle first; and whether to buy from outside sources or to build platforms internally.  Often, significant up-front costs must be balanced against the multitude of advantages that are enjoyed by an advanced, integrated technology system.   A recent study by the Boston

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Growth in a Franchise System: Maximizing Unit Level Economics

It starts at the top, with you – the franchisor: implementing an efficient system; instilling the culture; providing units the tools to succeed. A vital aspect of each of these components is communication. Franchisors must communicate with their franchisees beyond providing them with marching orders. Franchisees are much more likely to embrace your decisions and buy into an idea if they understand the rationale behind them.   In general, make

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