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Buying a Business

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newbus

Junior Member
What is the name of your state?What is the name of your state?
CA
We are in the process of buying a stablished business that is part of a Franchise. We are buying the business but no the Franchise. Should we be concern about the contract between the original owner and the Franchise?

We will change the name and the menu.
 


JETX

Senior Member
newbus said:
Should we be concern about the contract between the original owner and the Franchise?
Absolutely!!!
You need to have your attorney review the FULL franchise agreement to see what impact it may have on your plans. For example, a lot of franchisers hold liens on the equipment (especially 'special' equipment related to the franchise). You need to make sure the seller has the right to sell. Further, some franchises hold the lease or are the landlord for their franchisees.
There are LOTS of huge potential problems in the future if you don't review and resolve these (and many other) possible franchise issues.

Has the seller agreed to a WRITTEN release and to indemnify you in the event that the franchisor pursues you??
 

newbus

Junior Member
Yes, the owner agreed to signed the letter you mentioned. would that be enough or we still need to have a lawyer review the contract? We had to fill out an application to the landlord for the place and we still waiting for the approval.
 

JETX

Senior Member
newbus said:
Yes, the owner agreed to signed the letter you mentioned. would that be enough or we still need to have a lawyer review the contract? We had to fill out an application to the landlord for the place and we still waiting for the approval.
The fact that he is willing to indemnify is good.... but certainly NOT foolproof. What if he files for bankruptcy, etc.??

Your best bet is to have an attorney review the franchise agreement and see what, if any, obligations a new owner will have.
 

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