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CLIENT IN THE NEWS: PAPAYA KING
Papaya King, the iconic New York City based hot dog stand founded in 1932, invented the unique combination of tropical drinks and frankfurters. The restaurant has been deemed "As vital to NYC as the subway" by Zagat and was named "One of the top 500 things to eat before it's too late" by RoadFood.com. Julia Child declared Papaya King "The best hot dog in New York", while the New York Times declared Papaya King "The best hot dog in the world". Our client, the new owner of the Papaya King assets, brand and intellectual property, recently closed and restored the original restaurant at 86th Street and Third Avenue that had not been refurbished since 1960. Our client re-opened the business several weeks ago to an incredible response from customers, critics, employees and the press, including the September 22, 2010 issue of the Wall Street Journal, which equated the closing of Papaya King to "art connoisseurs having to watch the Louvre shutter its doors". (To see the full article click here.)
Our client replaced every screw, tile and wire in the restaurant, yet honored its rich history and loyal customer base in doing so. The reopening was the first step in what our client believes will be an international roll-out of the brand. We congratulate our client on this achievement!
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| FRANCHISOR 101: USING A FRANCHISE CONSULTANT
People who run successful businesses often see franchising as their best bet for expansion, and hard times like these make the idea especially appealing. Why now? One reason is that the fall-off in economic activity has caused rents for commercial real estate to drop substantially, possibly making for big cuts in startup costs for the new franchisee. Another is that recessions sour many hard-driving men and women on life as an employee, leading to a bigger pool of talented, committed franchisees.
In short, as unlikely as it might seem, this maybe a good time to turn yourself into a franchisor, and the proof is an apparent increase in the size of the cottage industry of consultants ready to lend you a helping hand. Google the words "franchise" and "consultant" and you'll see what I mean.
How do you find a good one? First of all, understand that it's tough work launching a franchise company, and the smart business owner knows better than to try it without expert accounting and legal help and, in some cases, operations and administrative guidance. In plain English, beware of the consultant without accounting expertise, for example, who offers to crunch your numbers for you. If your numbers don't add up, you may lose time while a good accountant straightens things out. Worse, you might end up in court fighting a losing battle against an angry franchisee accusing you of deception.
Also, beware of anyone selling one-size-fits-all documentation. One size never fits all when it comes to the documentation involved in franchising, and a moment's thought shows why.
To be sure, franchise law differs state to state, and federal law has its own peculiarities, but it remains true that the documents involved in launching a franchise company follow similar patterns. But no franchise company is exactly like any other, and if you want your own operation to succeed, you need foundational documents that reflect your vision and the circumstances of your individual business and that are legally sound.
To get that done, you need someone who knows how to express the ideas and facts of your enterprise in the language of the law and is licensed to practice law. In many cases, legal documents prepared by non-lawyer consultants can lead to trouble, even to disaster.
Does this mean that, as specialists in franchise law, we don't like working with clients who hire consultants? Of course not. Rather, it means we want you to find the right consultant - one who's been there, done that in franchising, one whose clients have had some proven success as franchisors and one who comes recommended by other experts in the field - because that one can be worth his or her weight in gold. We have had the good fortune to have worked with some of the best and can steer you in the right direction if and when the need arises.
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FRANCHISEE 101 - CENSUS STUDY SHOWS IMPACT OF FRANCHISING ON ECONOMY
The ongoing recession is bad news for businesses of all kinds, but franchising remains big business - really big business. What's more, if you itch to start a business of your own, the slowdown in the economy is exactly what should put franchising at the top of your list of options. (For that matter, as the accompanying article in this newsletter shows, the same is true if you already run a successful business and itch to franchise it.)
In a first-ever study, the Census Bureau and the International Franchise Association collected data covering more than 4.3 million business establishments in 295 industries, of which more than one in ten, or about 450,000 businesses in all, were owned by either franchisors or franchisees.
Among the franchise businesses, nearly 77 percent were franchisee-owned and the rest franchisor-owned. Payroll for franchise businesses in both categories covered nearly 8 million workers and injected almost $154 billion into the economy in 2007. Together, these franchise businesses racked up nearly $1.3 trillion in sales, or about 13 percent of the $7.7 trillion in sales generated by all of the businesses in the study.
These numbers are important. If 10.5 percent of the businesses covered in the study were franchise operations and they accounted for 13 percent of the sales generated by all of the businesses, you can draw only one conclusion - namely that franchise businesses tend to do better than non-franchise businesses.
"Franchising plays a vital role in our nation's economy and drives new job creation," said Ken Walker, chairman of the International Franchise Association in releasing the results of the study. "These new data demonstrate that franchise businesses provide many options for entrepreneurs who may be considering starting a franchise business."
Of the 450,000 franchise businesses included in the study, fast food restaurants constituted the lion's share - nearly 125,000. Next in line were gas stations with convenience stores, with nearly 34,000 establishments, and full-service restaurants, with more than 30,000. Franchise new car dealers, on the other hand, racked up the most in sales revenues - $688 billion - followed by gas stations ($131 billion) and fast food restaurants ($113 billion).
For details on the study and other data, Click Here. |
IN THE NEWS
Barry Kurtz was featured in Dr. Mark Goulston's article on franchising in his September 5, 2010 column, "Solve Anything with Dr. Mark", in the Business Section of the LA Times. See the article [Click Here.] |
NEW APPOINTMENT - SOUTHWESTERN UNIVERSITY SCHOOL OF LAW ALUMNI ASSOCIATION
We are pleased to announce that Barry Kurtz was recently appointed to the Board of Directors of the Southwestern University School of Law Alumni Association.
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This communication published by Barry Kurtz, APC is intended as general information and may not be relied upon as legal advice, which can only be given by a lawyer based upon all the relevant facts and circumstances of a particular situation.
Copyright © Barry Kurtz, A Professional Corporation 2010
All Rights Reserved.
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Contributing Expert
Joshua L. Brannon, Trinity Capital
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Barry Kurtz is a prolific writer on the subject of franchise law. From due diligence to franchise appraisal, his articles are a valuable resource to any franchisee and franchisor. He has been named a Certified Specialist in Franchise and Distribution Law by the State Bar of California Board of Legal Specialization.
Visit our website for more articles
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