Barry Kurtz dark logoFranchise First and Foremost
October 2010
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CLIENT IN THE NEWS:  TGA-PREMIER JUNIOR GOLF 
 

In August 2003, Josh Jacobs, then 27, started TGA-Premier Junior Golf in Los Angeles. Today, TGA's franchised school and after school golf instruction programs, golf clinics and camps are offered in 2,100 schools in 21 states across the US.

Golf Magazine [Link] recently named Josh one of its "Fab 40 Under 40", golf's "up-and-coming generation of influencers, trendsetters, and newsmakers, an eclectic mix of talent worth watching today and for many years to come."

We congratulate Josh on this honor and TGA's substantial achievements.

FRANCHISOR 101:  A VIOLATION IS A VIOLATION, OR IS IT?

 

Franchisors who start selling franchises before they register their disclosure documents arm their franchisees with a host of rights and remedies, including the right to rescind the franchise agreement. But a recent case in Minnesota permitted a franchisor to get away with a technical violation of that state's registration requirements without adverse consequences.

 

The franchisor in question submitted its registration documentation in April, 2007, and received approval from the Minnesota Department of Commerce in July. While the registration application was pending, the franchisor and franchisee negotiated and entered into a master franchise agreement, effective June 4. So there was no question that the franchisor had violated the law by signing up the franchisee.

 

The franchisee argued that the sale of the unregistered franchise constituted grounds for rescinding the master franchise agreement. To support its argument, the franchisee noted that Minnesota franchise law provides that "a person who violates any provision...shall be liable to the franchisee...who may sue for damages...for rescission, or other relief..."

 

Not so fast, the court ruled. The franchisor's violation was a technical violation of the registration requirements, so the franchisee had no absolute right to rescind the agreement. In any case, the court added, Minnesota case law limits the factual grounds on which franchisees can seek rescission, and "to avoid unjust outcomes based on technical violations, absent actual fraud, franchisees do not have an absolute right to rescind a franchise agreement."

 

Franchisors should not interpret this holding as a grant of permission to commit technical violations of state registration laws. Indeed, franchise law in general gives franchisees, not franchisors, the benefit of the doubt, so the surest way to get a good night's sleep is to cross every "t", dot every "i" and follow the law in every way.

FRANCHISEE 101 - JOBS ACT MAY EASE CAPITAL ACCESS PROBLEMS

 

There is good news for franchisors and franchisees alike in legislation signed into law last month by President Obama.

The new Small Business Jobs Act establishes a three-pronged lending effort to make it easier for small businesses in general, including franchisors and franchisees, to gain access to capital - one of the biggest problems faced by the franchising industry in recent years.

The act creates a $30 billion "small business lending fund" accessible to small community banks to make loans to small businesses. Small community banks, like their big counterparts, called a halt to much of their lending to small businesses once the current downturn in the economy began. Before that, banks with less than $10 billion in assets had been primary sources of capital for small businesses.

The act also authorizes the federal government to provide an additional $1.5 billion in grants to state lending programs targeting small businesses - another important source of capital for the franchising industry.

Last but not least, the act increases current limits on loans underwritten by the Small Business Administration. Limits on SBA 7(a) loans go from $2 million to $5 million, while those on 7(a) express loans go from $350,000 to $1 million. Limits on 504 loans go from $1.5 million to $5.5 million, and those on the SBA's micro loans go from $35,000 to $50,000.

In all, according to the SBA, these measures will increase lending to small businesses by $5 billion in the first year.

The act also creates $12 billion in tax breaks for small businesses, start-up entrepreneurs, and venture capitalists. One such break allows small businesses to deduct certain capital expenditures for equipment against taxable income. Others:

·         Eliminate capital gains taxation on proceeds from the sale of small businesses owned for more than five years;

·         Permit small businesses to carry back losses over as many as five previous years, amending tax returns to deduct losses from profits and receive tax refunds;

·         Allow self-employed business owners to deduct family health insurance expenses from self-employment tax income, and

·         Increase the amount of deductible start-up expenses to a maximum of $10,000.

Government forecasters predict the act will generate 500,000 new jobs in coming years. Whether or not that proves to be true, the act puts new power in the hands of franchisors and franchisees alike to position their own enterprises for growth in the coming years.

IN THE NEWS

The most recent Lawyer Profile Report issued for Barry Kurtz by Martindale.Com shows that his Lawyer Profile page was #1 in weekly profile views out of 1,107 lawyers in Encino, California, and #601 in weekly profile views out of 1,118,064 total lawyers listed by Martindale.Com.

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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.
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.

 
In This Issue
Client in the News: TGA-Premier Junior Golf
Franchisor 101: A Violation is a Violation, Or Is It?
Franchisee 101: Jobs Act May Ease Capital Access Problems
Contributing Expert - Gian Pazzia, CCSP and Scott Jarret, KBKG, Inc.
Prior
Newsletters
Contributing Experts

Gian Pazzia, CCSP & Scott Zarret
KBKG, Inc.  

Barry Kurtz
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.



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