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Posted on Tue, 11/15/2011 - 09:17 PM by
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The spouse of a franchisee may be compelled to disclose bank account information. Willie Earl Williams Jr sold his McDonald's franchise and invested the money in ProShred franchises. Things went badly, and Williams sued the franchisor in New York federal court. The franchisor responded that one of the reasons that the ProShred franchise failed is that Williams was undercapitalized. The franchisor said that when Williams applied for the franchise, Williams stated that he had sufficient capital, and therefore the franchisor was entitled to discovery of Williams' bank accounts from the time when he was applying to become a ProShred franchisee. The franchisor subpoenaed bank records including joint bank accounts held by Williams and his wife. Williams moved for a protective order. Because the bank records are in Florida, there was a Florida proceeding to determine what records needed to be disclosed. The court held that since Williams had admitted (during his deposition) that part of the assets which he intended to use for the business were under his wife's name, that the franchisor was entitled to copies of the joint bank accounts. The court did quash the subpoena for "any and all documents" relating to Williams on the basis that such a demand was over-broad. (The franchisee has moved for clarification of the Order, and that matter is pending.) The lesson for franchisees who have a spouse is clear: if you don't want to give your franchisor access to your spouse's personal information, keep it segregated. Many franchisees are not aware that franchise agreements commonly permit the franchisor to demand the personal tax returns of the franchisee (even if there is no pending litigation) and if those returns are joint returns, that should be something franchisees bear in mind. Another interesting aspect of the ProShred case is the claim that the franchisor made a de facto FPR despite an offering circular that disclaimed any earnings claims. ProShred requires the franchisee to attain "Minimum Performance Levels" (MPL) and gives the franchisee a list of what those levels are. For example, ProShred told Williams that these were the MPLs for the first five years of operation: In addition, the franchisee claims that ProShred executives made specific financial representations. While that is not uncommon, it is also difficult to prove. It will be interesting to see how the court deals with the matter of whether such "minimum performance levels" are a disguised financial representation. ___________________________________________
MORE NEWS FROM BLUEMAUMAUGoing Green Costs Franchisees Much GreenBeing forced to buy imaginary products is just one of the nonsensical results of government policy affecting franchisors and franchisees. Good News, U.S. Hotel Profit RecoveryAccording to the new PKF Trends survey, the U.S. lodging industry produced a 12.7% profit growth in 2011. 80.5% of participating hotels enjoyed an increase in total revenue while 72.3% achieved growth in profits. The recently released 2012 edition of Trends presents data from a sample of nearly 7000 financial statements of United States hotels. For the Trends report, hotel profits are defined as net operating income (NOI) before deductions for capital reserves, rent, interest, income taxes, depreciation and amortization. Federal Court Invalidates "Quickie" Union Election Rule, For NowOn May 14, 2012, the U.S. District Court for the District of Columbia set aside a controversial final rule of the National Labor Relations Board ("NLRB") that was designed to make it easier and faster for unions to hold organizing elections. Chamber of Commerce of the United States of America, et al. v. NLRB, Case No. 11-02262 (D.D.C. May 14, 2012). Business groups are hailing the decision, but the celebration may be short lived. Because the ruling was essentially decided on a procedural point, the NLRB may seek to resurrect the rule, which creates a very short window for union elections, and leaves employers with little time to react to an organized union campaign. Field Representatives Coach Franchisees to Victory
A good coach will make his players see what they can be rather than what they are. "Live For Now" Stars Dead IconPepsiCo announced aggressive marketing plans, boosting ad spending by 20% and bringing back deceased pop icon Michael Jackson as part of a worldwide campaign. RELATED SMALL BUSINESS NEWSHot Franchise Topic: Getting a LoanIt seems like the entire franchise industry is focused on funding, and with good reason; franchise loans are still a bit challenging to secure. Production Agreements of a Supply Chain; The Other End of the RainbowMany years ago I was pulled away from my usual assignments to do a major product production tolling agreement between two of America’s larger food companies. It was a stroke of luck for me because it provided something new for my interest in multivariate risks management. Since then I have prepared many multivariate high risk agreements, and it is always an enjoyable as well as remunerative adventure. When you think of every brand as a franchise in itself, it fits perfectly into my customary practice of managing franchise relationship disconnect issues. Know the Benefits of Application Protection in Any OrganizationIt is very important to ensure proper method of data availability on time. In that case, replication needs to be adopted in order to manage current backup information and system settings so that it can deliver fast restoration of data after any kind of disaster. As we know that it is not possible to avoid any kind of natural disaster or human error; but it is always mandatory to take proper measures for application protection, so that users do not face any kind of problem related to data loss. And, data replication is found to be the only way to remove or minimize the time lapse experienced in these situations. Pepsi Wants a New GenerationEverything the light touches this year is rapper Nicki Minaj’s kingdom. From the Billboard Top 100 to the Super Bowl half-time show, and her reign is about to expand to a major role in a new ad campaign for Pepsi. A Business Plan Should be a Requirement for Buying a FranchiseVisit any website that offers advice on starting a new business or expanding an existing one and you’ll find articles and advice on the importance of writing a business plan. There are tips ranging from how to write an effective business plan to the reasons why it’s so important. |
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