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Thursday
Dec012011

Safe Toys - Your Holiday Guide

Personal Injury Attorney Los AngelesDefective Product Attorney 

 

 

by David B. Bobrosky
(818) 907-3254

 

The holiday shopping season is here, and now is the perfect time to brush up on safe toys buying guidelines.

Whether you’re a parent, relative or family friend of someone with children, you want to make sure that the toy you are giving will not pose a risk to that child – assuming of course, that all toys meet government toy safety standards.

But as we know too well, sometimes defective products slip through the cracks. That being said, you should first get up to date information on toy recalls before you go shopping. There’s a rather extensive list available here: Toy Hazard Recalls.

Then, ensure you pick an age appropriate toy for the child to minimize risks like choking hazards, electric shock or burns, strangulation, falls and other dangers.

When it comes to dangerous toys, here are five key dangers that you should look for:

1. Electric Toys – When it comes to small children, these toys generally require adult supervision. You should not only note the age recommendation, but consider also how mature or responsible the child is, before buying electric toys.

2. Balls & Marbles – The smaller the ball and the younger the child, the greater the risk of choking hazards. Also be careful of giving games or toys that have balls to older children with younger siblings. Generally speaking, balls 1 ¾ inches in diameter or less are dangerous for children under three.

3. Toy or Game Pieces – Again, follow the guidelines for balls, above. If the toy or game you’re about to buy has pieces that are smaller than 1 ¾ inches, think twice before giving that toy or game to a small child.

4. Inflatable Toys or Balloons and Squeeze Toys – There’s a suffocation risk with these, either when a child attempts to inflate the toy and accidentally inhales, or with smaller children who chew on toys (squeeze toys, burst balloon pieces, or deflated toys).

5. Straps – Toys with strings or straps are particularly dangerous for children under three, as toddlers sometimes get entangled in these. Watch out for items like toy guitars, purses and guns that come with shoulder straps.

 

Other Toy Safety Tips

 

The five most common types of dangerous toys are listed above, but there are other toy safety factors that you should be aware of as well. For example: 

  • Brittle plastic toys can break, leaving jagged pieces that can cut or puncture children.

  • Helmets are required by California law for bicycle riders under 18. If you’re buying a bike for minor, make sure you buy the right sized helmet too.

  • And of course, BB Guns and cap guns pose their own, obvious risks for children. 

 

Lead Paint Toy Recalls

 

Believe it or not, lead poisoning is still a problem for children, especially the younger ones. Young children are especially prone to putting things in their mouths.

The federal government limits the amount of lead that can be used in products, but the metal has not been banned entirely. It’s used in plastics, pottery, jewelry, sporting goods and hobby materials.

To keep your child safe from lead poisoning from toys, try to avoid giving toys and jewelry made in other countries, or recycling older toys made in the U.S.

 

Holiday Safety First

 

The most important thing to remember regarding toy safety, is to buy toys that are age appropriate for the child. Read all warning labels on the packaging and consider the maturity level of the child.

Because no matter how wonderful the gift you intend to give, nothing can beat keeping your loved ones safe and happy. Let’s make sure all the memories are good ones this holiday season.

David B. Bobrosky is a Los Angeles Product Liability Attorney. Contact him via e-mail: dbobrosky@lewitthackman.com, or by phone: 818.990.2120.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Tuesday
Nov292011

Franchise Law – 23 Items of the Franchise Disclosure Document (Part 2 of 2)

Business Litigation Attorney EncinoFranchise & Business Litigation Attorney

 

by David Gurnick
818.907.3285

This is the second of a two part blog on the Franchise Disclosure Document, or FDD.  Anyone who offers or sells a franchise in the United States must prepare an FDD and present it to their prospective franchisees.

A prospective franchisee must receive the FDD at least fourteen (14) days before any agreement is signed, or before the franchisor receives any consideration relating to the sale of the franchise.

The FDD contains information about the franchisor, its history, management personnel, litigation, terms and obligations of the franchise and other key aspects about the franchise that an investor should know.

The first 12 points of the FDD are explained in: Franchise Law – 23 Items of the Franchise Disclosure Document (Part 1 of 2). Items 13-23 are discussed below.

13. Trademarks.

One of the defining elements of every franchise is the existence of a trademark that the franchisor permits the franchisee to use, and that the franchisee uses to identify the business.

In this disclosure the franchisor identifies its principal trademarks, provides details as to their registration status in the United States Patent and Trademark Office and the trademark office of any state, and discloses if there have been any infringements of the trademark.

14. Patents, Copyrights and Proprietary Information

In addition to trademarks, most franchise systems also claim to own trade secrets. In a few systems, the franchisor claims to own valuable copyrights or patents that are licensed to the franchisee. Information on trade secrets, copyrights and patents is disclosed in this disclosure item.

15. Obligation To Participate In The Operation of the Franchise Business.

Often, an individual or couple buys and actively operates their franchise. It is common to see the owner behind the counter of a Subway sandwich shop, or local gas station, or in the management office of a franchised hotel. Franchisors prefer this and sometimes require that the franchisee actively participate in operation of the business.

Some franchisees acquire multiple units. When that occurs, the franchisee cannot possibly be in all locations at once. Sometimes investors buy franchises, planning to hire others to run them.  This item discloses the extent that the franchisor requires the franchisee to actively participate in operating the business or will allow the franchisee to be absent or passive with the franchise operated by others.

16. Restrictions On What The Franchisee May Sell.

All McDonalds sell hamburgers, fries and shakes. Imagine if some locations also sold tacos, burritos and enchiladas, and other locations sold spaghetti, ravioli and macaroni, and still others sold chop suey and won ton soup. Soon the public would be confused about the system’s products.

To maintain uniformity between locations, franchisors set limits on the products and services that their franchisees may sell. This disclosure item summarizes those limits.

17. Renewal, Termination, Transfer and Dispute Resolution.

At its core, a franchise is a license that permits a franchisee to do business using the system and identity and know-how of the franchisor. Because franchises involve a sizeable investment, some important considerations in buying a franchise, are the duration of the license, circumstances in which the license could be terminated early, whether it can be renewed and any restrictions on the franchisee’s ability to transfer the franchise to someone else.

This disclosure item is a table that identifies and summarizes key provisions of the franchise agreement on these and related subjects.

18. Public Figures.

In the 1970s franchisors often enlisted famous people to endorse their business and lend their names and reputation to the process of offering and selling franchises. Typically, these famous people were getting paid, but that was not disclosed to naive franchisee investors. Therefore, the FDD is required to disclose whether any famous people are involved in offering and selling franchises, and summarize their compensation for doing so.

19. Earnings Claims.

A question that many potential franchisees ask is “how much money will I earn?” By presenting selective data, or even manipulating numbers, the answer to this question could potentially be overly positive, or even misleading.

The FDD permits a franchisor to present information on the past financial results and even future projections. But they must be accurate, have a reasonable basis, and be accompanied by certain disclaimers specified in the disclosure rules. Any such earnings claims are contained in this item of the FDD.

20. List of Outlets.

The franchisor is required to attach a list of locations, with names and contact information for the owner of each franchise.  A list of ex-franchisees who recently left the system must also be attached.  This information assists a prospective franchisee who may wish to contact and interview some existing and former franchisees to hear and evaluate their satisfaction with the franchise system.

22. Financial Statements

A franchisor is required to provide its audited financial statements for the past three years. This is useful for the prospective franchisee to evaluate the franchisor’s financial performance and financial condition.

22. Contracts.

A copy of each contract to be entered into, must be attached as an exhibit to the FDD. This provides the potential franchisee an opportunity to review the actual contracts before they are entered into.

23. Receipt.

The last item of the FDD is a receipt. Two copies of the receipt are attached to the FDD. One copy is to be signed by the recipient of the FDD and returned to the franchisor. The recipient may keep the other copy.

The franchisor is required to present the FDD to the prospective franchisee at least 14 days before any agreement is entered into and any consideration is paid. The receipt, when signed and dated to acknowledge receipt of the FDD, provides the franchisor a record confirming that this requirement was satisfied.

Franchise Law in the United States

The FDD is a useful tool for prospective franchisees in evaluating a franchise being offered. Even though the categories of information are uniform, each company’s FDD differs from each other company, and a particular company’s FDD will differ from year-to-year.

This article has summarized the contents of the FDD’s 23 disclosure items, but the discussion is only a summary. The detailed regulatory instructions for preparing the FDD include various additional subjects and requirements within the above categories.

David Gurnick is a franchise law attorney and author of two books, Distribution Law of the United States and Franchise Depositions, both available through Juris Publishing, Inc.  Mr. Gurnick is certified as a specialist in Franchising and Distribution Law by the State Bar of California, Board of Legal Specialization. You may reach him at Lewitt Hackman: 818.990.2120 or dgurnick@lewitthackman.com.

 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Nov232011

Franchise Law – 23 Items of the Franchise Disclosure Document (Part 1 of 2)

Business Litigation Attorney EncinoFranchise & Business Litigation Attorney

 

by David Gurnick
818.907.3285

 

Since 1979, any company wishing to offer and sell franchises in the United States has been required to prepare and present a written disclosure document to prospective franchisees.

The document provides extensive information about the company that offers and sells franchises, and the terms of the franchise being offered. Over time, the rules have changed concerning the name and precise contents of the document. But generally, the overall categories of information to be disclosed have remained the same. Today, it is called a “Franchise Disclosure Document,” or an “FDD.”

Here are the first 12 of the 23 categories of information that a franchisor's FDD is required to contain.

1. The Franchisor, It’s Predecessors and Affiliates.

This category provides a general introduction to the franchisor and the business. It describes the nature of the business, the market for the services or merchandise to be sold, particular laws the franchisee must comply with, the franchisor’s history, and information about companies affiliated with the franchisor.

2. Business Experience.

The FDD identifies the board of directors, officers and other key management personnel of the franchisor, and describes their current positions and employment histories, going back five years. With this information a potential franchisee can assess the business experience of the franchisor’s management in relation to the business of the franchise.

3. Litigation.

Litigation and arbitrations brought against the franchisor during the last 10 years, and their outcomes are described here. This category also provides summary information on suits and arbitrations that the franchisor brought against its franchisees. This information can be a useful tool in assessing the quality of relations between the franchisor and franchisees, and the types of problems that have occurred, that resulted in litigation.

But it is only a partial tool. The existence of litigation and claims does not automatically mean franchisor-franchisee relations are generally bad. The cases that were brought could be aberrations. The absence of litigation or arbitration does not mean relations are good. There could be disputes that did not result in litigation.

4. Bankruptcy

Bankruptcies of the franchisor or management during the past ten years are covered here. As with litigation, the existence of a bankruptcy or two among management does not, by itself, mean the franchise should be avoided.

Many individual managers, like other people, have been forced into bankruptcy for extraneous reasons having little to do with the franchise, such as a spouse or relative experiencing costly health issues. On the other hand, where key management has had one or more bankruptcies, it may be fair to ask why, and evaluate if they are individuals who have problems managing financial affairs.

5. Initial Franchise Fee

This information category discloses all amounts the franchisee must pay to the franchisor before the franchise starts operating.

6. Other Fees

Other Fees include all amounts the franchisee must pay to the franchisor after the franchise starts operating. This can be a particularly useful disclosure as it assists the potential franchisee in understanding the various fees and charges that will be imposed.

7. Initial Investment

Food FranchiseThe Initial Investment appears in a table that shows, for each category of expense that a franchisee will incur, a high-low range and an overall high-low range for the total investment to establish and start operating the franchise. This disclosure item can be particularly useful for a franchisee in determining affordability of and budgeting a potential franchise investment.

8. Restrictions On Sources Of Products And Services

Franchise systems often set restrictions on who the franchisee may obtain supplies, inventory and services from. Franchisors do this as a quality control measure, and to assure uniformity among the various outlets in their franchise system.

This category discloses the restrictions that the franchisee will be subject to in obtaining merchandise and services for the franchise.

9. Franchisee’s Obligations

The obligations table outlines 24 categories of obligations the franchisee will be required to comply with, and identifies particular sections in the Franchise Agreement, and/or in other agreements to be entered into, that concern that type of obligation. Rather than state the substantive obligation, this disclosure table points the franchisee to the statement of the obligation in the written agreement to be entered into.

10. Financing

Many franchisors offer to assist their franchisee with financing the franchise investment, either by accepting a promissory note for some of the investment obligation, or by making arrangements with third party lenders. This disclosure item provides a table summarizing key aspects of any financing arrangements that the franchisor is willing to make.

11. Franchisor’s Obligations

This disclosure category is one of the most extensive in the FDD. It summarizes assistance the franchisor has promised to provide before the franchise starts operation, and ongoing assistance to be provided after the start of operation.

Franchisors usually offer a training program in the operation of the franchised business. This category details the training, in a table that lists subjects, hours devoted to each, and whether that portion of the program is conducted in a classroom or on-the-job setting.

Other subjects addressed in this disclosure item include information on the franchisor’s advertising program, existence of advertising cooperatives, required participation in an advertising fund, details of any electronic point-of sale system the franchisee must purchase and the table of contents of the franchisor’s operating manual.

12. Territory.

Franchisees often want, and receive, a promise of exclusivity in a geographic area or market sector. Their franchisor promises not to establish another franchise within a stated area or market sector. This disclosure describes any territory exclusivity for the franchisee, how it is determined, and the circumstances in which exclusive territory may be modified.

In my next blog, we’ll discuss the final items franchisors must divulge in Franchise Law - The FDD Part 2 of 2. In the meantime, please contact me if you have any questions regarding franchise law, the Franchise Disclosure Document, or any of the points above.

David Gurnick is a Certified Specialist in Franchise and Distribution Law, as specified by the State Bar of California’s Board of Legal Specialization. E-mail him at dgurnick@lewitthackman.com

 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Nov102011

Before You Buy a Franchise | Franchise Information for the Uninitiated

 

Franchise Agreement LawyerState Bar Certified Specialist, Franchise & Distribution Lawby Tal Grinblat
818.907.3284

 

When you buy a franchise, you buy more than just the right to sell certain services and/or products. You buy name recognition, a marketing plan and the expertise of business professionals who hopefully have track records for competing in the marketplace.

There’s a certain amount of security in buying a franchise that has name recognition you don’t necessarily get when launching a brand new business concept – and that level of comfort can be especially attractive to new business owners.

However, buying a franchise can also involve significant financial costs and risks, so it’s important to do a thorough investigation before buying and signing any franchise agreement.

Franchise Lawyer Tips

Here are some things to consider:

1. Franchise Costs

You’ll want to consider the total cost of getting into the franchise, which involves more than the initial franchise fee. Before pulling the trigger, a prospect needs to consider all the following fees and costs of buying a franchise, such as:

▪ Franchise Fee – Depending on the franchise system involved, this fee could be several thousand to hundreds of thousands of dollars.

▪ Real Estate – You will need to consider whether to buy or lease the site where your franchise will operate. Some franchisors will have strict specifications regarding the location of your new business.

▪ Build Out Costs, including Equipment — Not all franchises are equal in terms of build out costs.

Some systems require a relatively small initial outlay for build out costs (costs for building and equipping the franchise), if the franchise is a cart in a mall or a department within another store, for example.

Other systems can have significant costs which you will need to incur for constructing the premises following the franchisor’s criteria and equipping the franchise.

In addition, some systems require the purchase of proprietary systems, equipment and software, not readily available elsewhere which can increase the start up costs, sometimes fairly dramatically. Others do not. So it’s important to compare these differences among competitors.

▪ Royalty Payments – You’ll need to pay royalty fees for the use of the franchisor’s name and system. These payments may be a flat monthly fee or based on gross revenue by week or by month. These fees can range from three percent or more than ten percent off the top. You’ll need to study the franchise program to assess whether you can make a decent profit after royalties are deducted.

▪ Advertising Fee Contributions – Many franchise systems require franchisees to contribute to a national or regional advertising fund (in addition to local advertising requirements). These fees are used to promote the franchise system as a whole. This type of advertising can build brand recognition system-wide.

However, franchisors usually have wide discretion to decide the type of advertising to be used (Internet, broadcast, billboard) and how to direct the advertising—whether to focus on areas where there is a greater concentration of franchisees, etc. So these expenditures may not benefit all franchisees proportionately and franchisees generally have very little say on how the franchise system spends this money.

2. Franchise Choices

 

In conducting your due diligence, how do you find out which franchise is right for you? First, you should decide on a particular industry based on the type of work you like to do. Then determine how much time you are willing to commit to that work. Do you want a franchise with a set, 9-5 schedule? Are you interested in food service, graphic design, or auto repair?

There are many ways to choose the right franchise for you. Three methods for doing so are:

▪ Getting Recommendations from Existing Franchisees – One of the best resources to determine whether a concept is a good franchise opportunity includes speaking to existing franchisees. An existing franchisee can provide information about the franchisor’s principals (are they easy to deal with), whether the franchisee recommends the franchise system and the potential sales and revenue a franchisee can expect to derive.

▪ Attending Franchise Expositions – There are various franchise trade shows, such as The West Coast Franchise Expo in Los Angeles. These are great forums for discovering the wide variety of franchise opportunities available.

▪ Consulting Franchise Brokers – A broker can match your interests, resources and needs to available franchise opportunities. However, most brokers work on commission and may try to match you to the franchises that require larger franchise fees.

Other brokers may work with a limited number of franchisors, so they may offer you fewer choices than brokers that have a wider network of referral opportunities. It is therefore important to conduct due diligence on any broker you speak to.

3. Franchise Disclosure Documents

The Federal Trade Commission requires a franchisor to provide you with a disclosure document (usually referred to as an FDD) at least 14 days before you sign a franchise agreement or pay any money to the franchisor.

▪ Business Background – of the franchise company and its officers, directors and managers, special laws that affect the franchise, required permits to operate the franchise and general description of the competition.

▪ Litigation History – material litigation, administrative cases, government orders and injunctions affecting the franchisor and its principals in the last 10 years.

▪ Bankruptcy – recent bankruptcies filed by the franchisor and its principals in the last 10 years.

▪ Franchise Costs and Initial Investment – initial and ongoing royalties, advertising fees, and all other payments the franchisee must make both to enter the franchise and during the franchise relationship. The franchisor will also provide information on the expected initial investment to enter the franchise.

▪ Training – provided by the franchisor before start of the franchise.

▪ Exclusivity – provided by the franchisor from other franchisor owned and franchised outlets.

▪ Information – on the number of franchised and company owned outlets, terminations, non-renewals, etc. – the FDD will provide information on current and former franchisees, number of franchisee terminations, cancellations and non-renewals in the last three years and other useful information to find out whether the franchise system is stable or rife with turnover.

▪ Restrictions imposed on franchisees – in terms of supplies, services, sales, products offered, etc.

▪ Renewal, Transfer Obligations and Post Termination Obligations – Conditions imposed by the franchisor for renewing the franchise, selling or assigning the franchise to another; and any post termination obligations, including the existence of any non-compete requirements.

▪ Audited Financial Statements – the FDD will include audited financial statements going back 3 years to enable the franchisee to assess how the franchisor is doing financially, whether the franchisor is making or losing money and whether they are financially stable or in decline. The audit report will also indicate whether the auditor believes the franchise company is showing signs of trouble.

Other than the above, there are many sources of information available through the Federal Trade Commission, the California Department of Corporations and other sites. So be sure to do your due diligence before jumping in.

The most important consideration before buying a franchise though, is protecting yourself financially. Be sure to have your accountant and franchise attorney look over the franchise documents, including the terms of the agreements, financial statements and the franchisor’s business structure, before you sign any agreements to ensure it’s the right fit for you.

Tal Grinblat is a Certified Specialist in Franchise and Distribution Law, as specified by the State Bar of California. For more information, call Mr. Grinblat at 818.990.2120.

 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Friday
Nov042011

A Car Accident in Los Angeles – Three Steps You Must Take

Injury AttorneyAccident Attorney 

 

by David B. Bobrosky

(818) 907-3254

 

When you have a car accident in Los Angeles (or anywhere else in the world) it’s often difficult to think clearly about the important steps you need to take to keep you, passengers and other drivers safe immediately afterwards.

 

First, according to California law, you must stop immediately after the accident. If not, you could be charged with a hit and run.

Once stopped, you’ll need to do three things.

First, your basic survival instincts should remind you to get off the road and to stay out of harm’s way. Rubberneckers are prone to causing serious, secondary accidents. We once represented a woman who was struck by a big rig while she was standing outside her car after a minor accident.

The second step is to check to see if anyone has been injured and to call for help if someone did experience anything from minor to extensive injuries, or if they seem to be in a state of shock. My advice is to call the police after every accident. But you’ll find that they usually will not respond unless you tell them someone is injured or the other party is not cooperating in the exchange of information. 

The third step, which often gets lost in the immediacy of the situation, is to document everything that happened.

Steps one and two protect you in the “here and now”. Step three will help you later, particularly in the case of future litigation, financial claims, and/or developing injuries.

California Accident Law – Handle the Legal Requirements First

 

If you’re involved in a car accident in California, you must present your driver’s license, vehicle registration, proof of insurance and current address to the other drivers involved in the accident.

If you don’t have one of our brochures available but you have a smart phone with a decent camera AND if the other drivers will allow you to do this, take photos of the other drivers’ information, ensure all of the text is in focus, and immediately e-mail the photo to yourself so it won’t get lost. Otherwise, grab pen and paper and start writing.

Accident Photos Speak a Thousand Words

 

Once you have everyone’s information, start taking photos of the scene. Get wide shots of the area (include street signs, stop signs, traffic lights, etc.) as well as close up images of anything damaged (yours and theirs), and license plates of the cars involved.

Try to get pictures of the cars before they are moved, if you can, but do not put yourself or others in danger in an attempt to get photos.

Accident Avoidance: Stay Safe When Driving

 

The ideal situation when driving is to do everything you can to avoid a car accident in the first place. You can do this by staying constantly aware. That means no eating, drinking or applying cosmetics while driving, and no using your cell phone while driving. In other words, no driving while distracted, or DWD.

It also means “driving defensively,” especially when you spot others “multi-tasking” on the road.

Sometimes though, no matter how careful you are, things just happen. If you’re involved in a Los Angeles car accident,

1. Get yourself and others to safety.
2. Check for injuries sustained during the accident, and potential dangers arising at the accident scene.
3. Document everything.

You can reach David B. Bobrosky in our Personal Injury Practice Group by dialing 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120