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Debra Hill
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Debra Hill’s Answers

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  • Can franchisor sue me-franchisee-I am formed as a LLC for "lost future revenues" if I close 2 years into the agreed 10 year term

    I am a franchisee in a young system (only 6 years old, I've been a franchisee for 2).The business is no longer profitable for me.I want to close it but have heard rumblings throughtout the system they are planning on suing for "lost future revenu...

    Debra’s Answer

    Your franchise agreement will dictate the terms between you and the franchisor. Generally, what the franchisor has done in the past with others only sheds light on how they will treat you. You cannot use it for a defense against the franchisor in your contract.

    Outside the legal realm (and putting on my former general counsel to franchisor hat), the reality often deals with your relationship with the franchisor. Does the franchisor believe that you are worth going after the future royalties? Do you have money or is it a case of good money after bad? Often, if the relationship between the parties has a lot to do with it. If the relationship has been a good one, a franchisor may only seek a promise that you will not compete and that you will release them from any claims you may have against them. If there is a "franchise war" going on between the franchisor and the franchisee, then a general release is certainly valuable to the franchisor if they are getting sued a lot.

    Get an attorney to negotiate this for you. This takes away from you being the "bad guy". Try the strategy of offering a general release and reenforcement of your covenant not to compete as a compromise. Hint about all the wrongs you did them if they resist. Franchisors do not like lawsuits. They must be disclosed, they are often messing (involving a franchisee's counterclaim) and they are unpredictable.

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  • Can my local franchise advertise on my website without having to jump through hoops?

    I plan on launching a website that advertises with coupons, products, etc. and before I approached my local franchise restaurant (i.e. Carrabba's, Outback, etc.) to sell ad space on the site, I was curious if that was something that each franchise...

    Debra’s Answer

    I would do both if you are launching nationally. If not, contact the local stores.

    Regarding advertising requirments for franchisees, most franchise agreements (especially restaurants) either have a local advertising requirement or a regional cooperative requirement. Local ad requirements typically make the franchisee spend 1% - 3% of their gross receipts each month advertising locally. The franchisee will know the requirements (including how to get approval) so I wouldn't worry about it. BTW, most franchisor's require pre-approval of all ads and often have ads for their franchisees to use already prepared. If there is a co-op, then several franchisees in an area draw together their marketing money to place ads. Again, the local franchisees will know who to contact. I would make sure I am talking to the owner and not the general manager.

    Regarding national advertising, most franchisor's have a marketing department so you would need to contact the marketing director. Franchise marketing departments will run national campaigns so if you can help them do this, contact them. If you are just looking for approval in your area, go to the local franchisees.

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