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Bought a License that seems to be a disguised franchise

Santa Rosa, CA |

9 months ago I bought a license to operate a frozen yogurt shop. I paid a $20,000 licensing fee and continue to pay a 5% royalty on gross sales. I think what I bought is a disguised franchise and I was not given anything other than the 35-page License Agreement that I signed. What can/should I do?

Attorney Answers 3

Posted

Many of the so-called licenses sold these days are really franchises in disguise. As a consulting and testifying franchise expert, I see this all too frequently. Trying to expand on the cheap, companies try to skirt the franchise laws by calling the relationship a license, a joint venture, a partnership, etc. It doesn't matter what name is appended to the contract. All that matters is whether a few discrete elements are present or not. I can't tell you whether your License Agreement is subject to the franchise registration and disclosure laws without first reviewing the document and discussing the nature of your relationship with the licensing company. I see yhou are located in California. You may have very significant rights that arise under California's Franchise Investment Law. Your best course of action is to contact a franchise attorney ASAP.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

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Posted

Based on your facts, it doesn't sound like the seller tried very hard to disguise the franchise (if that's what it is). If you didn't hire a lawyer to review the 35-page agreement before you signed it, you might want to think about doing that now.

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Posted

It is highly unlikely that a single location license for a frozen yogurt shop is a simple brand license at 35 pages. More likely than not, based on the page length alone, something else is afoot. Simply put, a real franchise is heavily regulated at the state and federal levels and typically requires a significant set of disclosure and other materials to pass muster. That being said, a franchise attorney can advise you on the statutory remedies that might be available to you.

I hope this helps.

Disclaimer: This answer is for informational purposes only and does not constitute general or specific legal advice, nor create an attorney client relationship.

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