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Getting out of a Franchise Agreement to Start our own

#1
What is the name of your state? Maryland
Hello. We joined a franchise about two to three years ago in an effort to start a business. However, the company basically may have been taking us for a ride. While they had a legitament product, I think they were aware that their requirements were so expensive that many developers in our area didn't care to deal with them. We had all sorts of problems with their real estate broker who rarely returned calls at all, and never really helped us find locations. We actually found every location our self (something we were never suppose to really do). Now I am not trying to sue, because I get how that part works legally (we are just screwed). The problem is that, we decided to just buy an existing business, and we found one. The problem is that we made the mistake of telling the franchise and they turned the location down immediately. Now, we extended the contract with the franchise a while ago, but we've been out of that extension for a while now, we just have to make it official. The contract states that anyone who signed the contract, is allowed to run that type of business within 20 miles of a previously scouted territory for 2 years, nor can they work for one. Now, here is my question,
My parents formed a C corp for this purpose, but they are the ones on the contract with the franchise company. However, my sister and I have our own LLC's and both do business, and nether have my parent's name on them. Could WE buy the business while keeping our parents legally off the business? I think we can, but the main problem isn't this technicality, its that the money for the company is now tied up in the C corp sitting in an account doing nothing. Our buisness's do not generate the funds to buy the company. So is their a scenario where we could buy the business, even if it means we have to buy the C corp?
 


Zigner

Senior Member
#3
Your matter is beyond the scope of an internet forum. You and your parents should sit down with an attorney who can review the contract and advise you. Best of luck to you.
 

adjusterjack

It's a Dry Heat
#4
Selling the business to a family member to avoid a contractual obligation can be fraud and can be undone or punished by a court. By punished I mean that, potentially, all that money can be awarded to the franchisor.

Don't risk it.

Time to get an attorney.