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Charles Nicholas Internicola
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Charles Internicola’s Answers

19 total


  • How to deal with a stealing LLC partner?

    I am 50% partner at a US importing LLC. My 50% partner seems to be fabricating fake invoices and (I assume) funneling funds into his personal accounts. The situation is particular because a lot of our funds come from go...

    Charles’s Answer

    So, your options will depend on the goals for your exit strategy. The starting point has to be with an understanding of where you are at today, how much time and capital you have invested in the business and what would be acceptable to you in terms of a buyout.

    This all needs to be balanced against potential risk you may or may possess as a result of your partners actions.

    So start off with what you want and then evaluate courses of action to potentially avoid litigation.

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  • Why would the company want me to franchise? Would it be uncommon to ask for some sort of compensation in return for franchising?

    I am a retailer in an A+ shopping mall for 10 years. I use only one supplier for my goods and use their trade name with permission, no contracts involved. This company has now become a franchisor. They are persuading, or basically forcing me to f...

    Charles’s Answer

    I believe that Kevin Murphy's response included valuable information that you should consider and continuing on that premise you should know that you may have more negotiating power and more options than you realize. You mention the upfront franchise fee and that the fee is not a lot but there are many more important provisions that you need to evaluate in terms of the franchise agreement that you may eventually sign, i.e., royalty obligations, advertising fund obligations, territory restrictions, non-competes, etc...

    Again understand that you may have negotiating power to influence these important provisions.

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  • My wife and I are getting ready to sign a franchise agreement. Should we put it in both our names?

    I am the bread winner of the household, my wife makes less than $20K per year part time Most all our valuable assets are in both our names If I keep her off and franchise agreement is there any advantages or disadvantages? Any legal re...

    Charles’s Answer

    You are about to make a serious investment and your question is a good one but there are many more issues. You really need to consult with an experienced franchise lawyer and evaluate this significant invesemt.

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  • We have a franchise that has not paid their franchise fees or royalties since September 2013. They have breached their territory

    Taking kickbacks, using our trademark, calling agencies and telling them that the franchise is the parent company, telling agencies not to work with us, adding addendum to our contracts with their new business name, using our equipment, contracts...

    Charles’s Answer

    Sounds like a lot is going on and I am sensing some hesitation on your part in pursuing this franchisee. So they have been in default for a number of months and are violating their franchise agreement.

    Are you concerned about the franchisee asserting that you (the franchisor) has violated the franchise disclosure laws?

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  • Hi, I am having issues with my partner. I own 25% of a business and my partner is liquidating the bussiness assets to his new bu

    he ran the present business into financial ruin and I took a job elsewhere and while I was at the new job he started another business and is cutting me out of the picture with out giving me any money for the trucks and heavy equipment

    Charles’s Answer

    So you don't offer much information and it sounds like you may have another job. Partnership asset misappropriations happen often and your response should be gauged by (a) the value of the assets, (b) whether or not the business is continuing, (c) If you intend to stay in this business. But basically, your partner will continuing to do what he or she is already doing unless you start a lawsuit seeking injunctive relief. When it comes to starting a lawsuit you need to evaluate the costs and benefits and you should start off with an analysis of factors (a), (b) and (c) that I mention above.

    To learn more about dealing with partnership misappropriation, I recommend
    http://www.franchiselawsolutions.com/library/partnership-lock-out-and-misappropriation-in-ny-or-nj-business.cfm

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  • I have a franchise agreement with a restaurant and have multiple locations. I believe they violated my rights on several levels

    We have not made money in the past 3 years however we did in the 4 years prior. They went up 5 percent on the cost of products sold to us while not allowing a retail increase. We do have a competitor less than 5 miles away that was allowed to in...

    Charles’s Answer

    From your question it sounds like you are an experienced operator with a significant operation. The profitability and the success of a franchise relies on many facets and I am not sure that just chalking this period of unprofitability up to the need to increase prices (which may or may not be accurate) as being a full explanation for your problems. Also sounds extreme that the CEO for the franchisor stated that he "failed you" but if this is the case then this admission may be positive from the standpoint that the franchisor may be prepared to assist you.

    Are other franchisees profitable?
    What are the reasons why the franchisor will not allow you to increase prices?

    Look, I am a franchise lawyer and I guess - in theory - there are always legal options (so please evaluate them with your lawyer) but you may have a business issue here and I believe you need to work with the franchisor and possibly a business consultant to evaluate your business and put together a more precise plan for bringing your business back to profitability.

    As to "violating your rights on several levels" - that may be the case but you really don't provide a description of these violations (other than price increases and training which I guess may or may not be a violation of your franchise agreement).

    However, I believe that your solution will require a deeper analysis and may involve many business issues that go beyond the expertise of a lawyer.

    - Charles N. Internicola
    www.BusinessandFranchiseLaw.com

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  • Can we sue our franchisor for not offering the assistance that was promised?

    We bought into a sport clips franchise. Our area developer didnt do what he was required to do. No communication, no help, not answering phone calls. After 5 years, corporate bought him out of his store and the wisconsin area. I lost at least ...

    Charles’s Answer

    Sounds like you are in a tough situation and maybe the franchisor contributed to it and maybe the franchisor did not - but it seems to me that you have a business problem right now and that the franchisor is trying to help. You also need to consider that although a franchisor is required to support you that - as a franchisee - you also share a good amount of responsibility for your own marketing, the effort that you put into the business and how you develop a base of raving customers.

    In the franchise arena there are franchisors that just drop the ball but there are also franchisees that fail to develop their own businesses. While it sound to me that you are a person concerned about your business one non-legal suggestion that I would make would be to focus on your business, take advantage of the support that the franchisor is providing and, most important of all, evaluate and assess whether or not you have been doing enough to make your business successful. I am sure that you work hard but working hard does not necessarily mean that you are focused on the right things.

    One test that I would give myself as a business owner is to write a list of the marketing tasks that I have completed in the past 30 days. If your marketing is exclusively print ads and coupons then I would suggest that you have not done enough. Have you consistently done direct marketing within your territory? have you cross-marketed your business with other local businesses? Do you maintain an updated customer mailing list? Other steps __________?

    Basically, while I cannot comment legally (I simply don't have enough facts) I believe that the solution to your problem goes beyond a legal question and gets to the heart of your business, what you need to do to make it successful and how to get there. Maybe a lawsuit can help you - I don't know? But the one thing I do know is that you need to also assess whether or not you share responsibility and, if you do, then use that insight making changes to get your business back on track.

    By the way, I am not making light of your question. Business is tough and can be emotionally draining when things do not go well. Don't give up and seriously consider what changes you need to make. Also consider asking the franchisor for even more assistance to make your business a model for recovering and reestablishing a successful franchised location.

    I wish you the best of luck.

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  • UFOC--AUDITED FINANCIAL STATEMENTS IN FL?

    In FL-is it necessary to have audited financial statements prepared and disclosed within the UFOC in order to sell a franchise?

    Charles’s Answer

    Irrespective of the registration state in which a FDD is filed, under the Federal Franchise Rule all franchisors must incorporate "audited" financial statements. However, if you are a start-up franchisor and meet certain criteria you may be provided with a limited "phase-in" period where you may initially file without audited statements, i.e. an unaudited opening balance sheet. However this phase-in applies only to your first fiscal year and provided that you meet other criteria.
    To give a more definitive answer additional information the history of your company is required, i.e.:

    Are you in your first fiscal year?
    Is your company new to franchising?
    Has your company produced audited financial statements in the past?

    For additional information about the inclusion of audited financial statements in a FDD, I recommend the following article http://www.franchiselawsolutions.com/library/starting-a-franchise---item-21-financial-statement-disclosure-requirements.cfm

    - Charles N. Internicola
    www.FranchiseLawSolutions.com

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  • I am want to start a franchise in California? Do I need to have audited financials for my business?

    In terms of the requirements for the offering circular in California, do I need to have audited financials for my business before I franchise?

    Charles’s Answer

    If your business is new to franchising then you may not need audited financial statements. However my recommendation is that at a minimum you start off with an audited opening balance sheet. However the requirements vary and require an assessment as to the prior business history of your franchise company. The following article provides an additional summary, however ultimately you do need to review this issue with a franchise lawyer.

    http://www.franchiselawsolutions.com/library/starting-a-franchise---item-21-financial-statement-disclosure-requirements.cfm

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