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Tuesday
Sep202011

When to Franchise Your Business - 7 Questions to Ask

Franchise Agreement LawyerState Bar Certified Specialist, Franchise & Distribution Law

 

by Tal Grinblat

818.907.3284

 

When to franchise, or not to franchise. . .that is the question many business owners routinely ask themselves.  There are certain guidelines and considerations companies can assess in deciding whether or not it’s time to franchise.  Here are some considerations:

If you’re content with the size of your business, your income, the positioning of your brand in the marketplace, the breadth of work involved in maintaining your business...then perhaps franchising is not for you. 

But if you want to grow your business and look forward to having new challenges to overcome, one very effective way to do so (with the added benefit of using other people’s money)  is through franchising. 

In deciding when to franchise, you should consider these questions:

1. Are You Profitable? Will Your Franchise be Profitable for Others?

This may seem like a no-brainer, but you’re not going to find people who want to buy into a struggling business model. And if you’re thinking franchising your business will actually turn diminishing profit margins around, it won’t.

You’ll need to take a look at why you are profitable and whether or not your income depends on fads, or solid products and services which can be turned into sustainable profits for years to come.  Franchised concepts that do not make a profit for their owners will not survive long, and may also lead to litigation.

2.  What is Your Business Model?  Will You Attract a Large Pool of Franchisees?

If entering the franchise will be too cost-prohibitive for potential licensees, you may not get many buyers. Franchising a new cleaning company for example, could be affordable to many people looking to break into business ownership. Franchising space travel launching pads would only be feasible for certain billionaires.   

3. Why Franchise Your Business? What are you offering that’s new?

You should consider your company’s unique traits that make you different and better than your competitors. If you’re not sure you have any unique traits that differentiate you from others, it may not be the right time or business to franchise.

4. Is Your Concept Replicable?

If your franchise concept is too dependent on your special qualities and traits which other franchisees may have difficulty replicating, franchising may not be for you. For example, a magician with unique skills and abilities may have difficulty franchising his magic concept if others cannot replicate these unique abilities.

5. Are You a Good Leader?

Are you prepared to offer support and training, and how much of it are you willing to provide? Many people who buy franchises are looking for guidance as they break into business ownership. But if you find it difficult to relinquish control, provide ample hand-holding for others, or are compelled to micromanage every last detail, selling franchises may not be an option for you.

6. How Will You Grow Geographically?

Imagine moving your business model from Los Angeles (or wherever your original store is headquartered) to Riverside. Will it still do well? Now try imagining it in Boise or Miami. If you think your concept will still draw customers and be profitable in many geographies, your business might make a good franchise.  However, if your concept is geographically dependent, like a windsurfing training camp, your market area for franchising may be more limited.

7.  What is the Regulatory Climate for your Business?

You should also consider specific regulations for your business. Are there certain states or geographies where your franchise will not succeed?  Will you need special permissions in local, county or state governments for your business? You’ll need to do plenty of due diligence before launching into franchise agreements.

When to franchise is always a tough question for business owners wanting to expand operations. Hopefully some of the questions above can help you start thinking about your available options.

Tal Grinblat is a California State Bar Certified Specialist in Franchise and Distribution Law. He can be reached via email: tgrinblat@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
Sep152011

Buy Sell Agreements – Protecting Your Interests From the Four Ds

Trusts & Estate Planning

 

by Kira S. Masteller
818.907.3244

 

Buy sell agreements are common estate planning tools for people with business partners. They ensure the continuity of the business in the event of the death, disability, retirement or withdrawal of one or more of the principles.

If you run a successful company with a business partner, you should consider executing a buy sell agreement to protect your own interests, as well as those of your family. Here are some scenarios to consider:

1. Death

▪ When a principle dies, will that person’s stock be repurchased, or can he or she leave that stock to a person of his or her choice? To assure the continuity of the business, it is usually best to repurchase the stock.

▪ Will the repurchase, if any, be done by the corporation or the other shareholders? This involves business and tax issues which will need to be discussed one on one with your attorney, since individual situations vary.

▪ A proper repurchase arrangement requires the use of life insurance, which also needs to be discussed in person to address your unique needs. For example, in a corporate redemption situation, if there is a $500,000 purchase price, the corporation will likely not have sufficient assets to pay that purchase price. Generally, life insurance is used for these purposes. (Be sure to read my previous blog, “Your Life Insurance Review” to understand why it’s important to keep your policies up to date.)

2. Disability

▪ If a principle becomes disabled, will s/he continue to receive salary and benefits? If yes, for how long? That person cannot receive salary payments indefinitely, because at some point those payments will be deemed to be dividends, which is subject to double tax.

▪ Will a disabled shareholder’s stock be repurchased? If so, we will have to discuss how the payments will be made, since life insurance will not be available for this purpose.

▪ Some of these issues can be addressed in employment agreements.

3. Departure or Retirement

▪ Will a shareholder’s stock be repurchased in the event s/he retires or withdraws? Typically, this does not happen because it places an economic drain on the corporation.

4. Divorce

▪ If your partner separates or divorces, will that put your interests in the company at risk? A buy sell agreement can protect you or your partner from unforeseen events like this.

If you co-own a business, it might be time for you to consider the future of your company and maintaining financial interests for yourself and your family. Buy sell agreements are one of the best ways to protect those interests from unforeseen events.

Kira S. Masteller is a California Trust Attorney and Shareholder in our Tax and Estate Planning Practice Group. You can reach her 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.

 

 

Tuesday
Sep132011

Perchloroethylene Cleanup Hangs Drycleaners Out to Dry

Litigation Los AngelesEnvironmental Litigation  

Stephen T. Holzer
818.907.3299

Drycleaners have been using perchloroethylene, a colorless liquid chemical also known as “PERC” or “PCE,” for decades. The chemical is also used in solvents, inks, shoe polish and other products, but it’s the dry-cleaning industry that accounts for 85 percent of its use.

PERC is a hazardous waste made with chlorine and other chemicals, and until modern-era environmental legislation regulating the disposal of PCE, the liquid leaked or spilled into the ground and seeped into water tables without much notice.

But federal and state-mandated clean ups are now hanging drycleaners out to dry financially, and insurance companies are also paying the price. In an attempt to find someone to pay for cleanup, some drycleaners are suing their machine manufacturers citing faulty designs and distributing use instructions that failed to warn drycleaners of potential perchloroethylene leaks and how to prevent them.

The drycleaner plaintiffs allege the machine manufacturers violated the federal Resource Conservation and Recovery Act, or RCRA, which governs all handling of hazardous waste from generation to disposal. RCRA provides for liability on the part of:

“Any person . . . including any past or present generator, past or present transporter, or past or present owner or operator of a treatment, storage, or disposal facility, who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment . . . .”

The Plaintiffs in Hinds Investments v. Patricia McLaughlin relied on this language in RCRA. But last August, the Ninth Circuit Court of Appeals rejected plaintiffs’ claims, stating:

“From the language Congress chose, it seems plain that Congress was concerned with those who handle, store, treat, transport, or dispose of the waste, not with manufacturers who design machinery that might generate a waste byproduct that could be disposed of improperly at hazard to the public.”

Despite the Appellate Court’s ruling, perchloroethylene cleanup remains controversial, because plaintiffs may still try to hold dry-cleaning machine manufactures liable under other, State-law theories.

But manufacturer defendants in the dry-cleaning industry can now argue that holding such defendants liable for what their customers is too far of a judicial reach even at the State level, when it comes to perchloroethylene leaks.

Stephen T. Holzer is the Chair of our Environmental Law Practice Group.  You can reach him via e-mail: sholzer@lewitthackman.com, or by calling 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.

 

 

Wednesday
Sep072011

California Environmental Law – How Much Cleanup is Too Much?

Litigation Los AngelesEnvironmental Litigation  

 

Stephen T. Holzer
818.907.3299

 

Nearly 3,000 acres of land in Ventura County is destined for open space use. . .if it’s ever cleaned up.

That vision may be put on hold, if the current mood of all parties involved give any indication. U.S. District Judge John F. Walter overturned Senate Bill 990 at the end of April, which practically guarantees the Boeing Company and the California Department of Toxic Substances (DTSC) will be legally wrangling for quite a while.

Here’s some background:  

Santa Susana’s Historic Roots

The land in question is known as the Santa Susana Lab, home to North American Aviation’s rocket and nuclear research and development projects established in 1947. Due to a series of company splits and sales occurring over the decades, the land is currently owned by Boeing, NASA and the Department of Energy.

There was a partial nuclear meltdown in 1959. And aside from the radioactive materials, a lot of other toxic chemicals (such as dioxins, trichloroethylene, PCBs and perchlorate) infuse the soil and groundwater from years of rocket testing.

The Environmental Law Twist

We don’t even need to go into decades of federal and state environmental law history to illustrate the problems with Santa Susana.

Let’s just go back to 2007 when the now retired Senator Sheila Kuehl pushed SB 990 to reassure Ventura County residents that Santa Susana and the immediate vicinity would be scrubbed as clean as possible. The bill even outweighed federal standards on its goals for cleanliness and safety, and the DTSC was named chief overseer of the work.

So who got on board with the bill? The Department of Energy and NASA. But in 2009 Boeing filed suit, protesting DTSC’s supervisory role. Boeing claimed, among other things, that Kuehl’s S.B. 990 is preempted by the federal Atomic Energy Act, 42 U.S.C. §2011 et seq.

Judge Walters agreed, saying that a federal installation (or, as here, a private one under contract with the feds) is “shielded by the U.S. Constitution’s supremacy clause from direct state regulation unless Congress provides clear and unambiguous authorization for such regulation.”

The DTSC and the California Environmental Protection Agency are disappointed with this ruling, to put it mildly. And when Judge Walter delivered the ruling, he mentioned probable scrutiny by appellate courts, according to an April 27th article in the Los Angeles Daily News.

Which only means that Simi Valley residents may have to hold their breaths a long time before the Santa Susana Lab gets the cleanup it needs, whether it’s by federal or state standards.

Stephen T. Holzer is a Environmental Attorney, Shareholder and Chair of our Environmental Law Practice Group. 

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
Sep072011

No Fault Divorce in California: Over 40 Years of Benefits & Consequences

Encino Tarzana Divorce LawyerChild Custody and Support Attorney Los Angeles

 

by Vanessa Soto Nellis
818.907.3274

San Fernando Valley Custody Lawyer Los Angeles

 

Believe it or not, it was the coastal “blue” states who first and lastly signed no fault divorce bills into law. 

Former governor Ronald Reagan signed the Family Law Act of 1969 which changed California family laws and set precedents for no fault divorces with other states for the next 40 years – while New York’s former governor David Paterson brought the Empire State on board in October, 2010. 

But what is a no fault divorce, and what does it mean for Californians in particular? 

Critics of the law have argued that the law makes it too easy to obtain a divorce. That may be true, considering that 50 percent of marriages tend to end in divorce these days. However, there are definitely some benefits to a no fault divorce:

 

No Fault” means “No Lying”  

 

Before 1970 (when the law went into effect) one party in a divorce had to state specific reasons for applying for a divorce. Oftentimes, when spouses just didn’t get along, a husband or wife had to claim physical abuse, adultery or make some other critical complaint. 

Back then, clients often lied in an effort to obtain divorces.

Aside from the legal muddle of ethical questions and perjury involved, the lying caused other problems. It often created a hostile atmosphere which made it difficult for separating couples to agree on divisions of community property, child visitation, child support, and child custody. 

Additionally, if one side is at fault and the other looks innocent of all wrongdoing, settlements on the above issues generally proved to be unfair to the “at fault” spouse.  

But who suffered the most before 1970? Usually, it was the children, whose parents tended to be hostile and bitter towards each other, and who sometimes saw their relationships with a particular parent decline because of court-ordered restrictions on visitation or custody settlements.

 

Other Benefits of the Current California Divorce Laws

 

 

Because fault is irrelevant when filing for divorce, separating spouses no longer have a “day in court” to tell all that went wrong in a marriage. Some of my clients, specifically those who have been emotionally hurt and angered, are disappointed when I tell them this. 

But not having to testify benefits almost everyone else, particularly victims of domestic abuse. They no longer have to summon up the courage to face their abusive spouse in a courtroom – a California no fault divorce makes it much easier for them to leave a violent marriage.  

 

Marital Advice From a California Divorce Attorney

 

One last thing you should know: Attempting to by-pass the California no fault divorce law with separate, conditional agreements regarding your marriage probably won’t work. 

For example, writing an agreement that assigns one spouse certain property if another spouse has an extra-marital affair won’t be recognized as a valid agreement by the California family law courts – because the judges cannot consider fault when dissolving a marriage. 

There may be other remedies available, like a prenuptial agreement, if you don’t specifically address such marital issues in the agreement – but it would take some forethought and planning by your family law attorney. 

The long and short of it though, is that the no fault divorce laws across the country are mostly beneficial to parties seeking a dissolution of marriage.

 

Vanessa Soto Nellis is a California Divorce Attorney in Los Angeles County. She is a shareholder at Lewitt Hackman in Encino.

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