Barry Kurtz dark logoFranchise First and Foremost
April 2011
16000 Ventura Boulevard
Suite 1000
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David Kim, the Chief Executive Officer of Baja Fresh, a leading chain in fast casual Mexican dining, was featured on CBS, 'Undercover Boss,' on Sunday, April 5, 2011. David went undercover to check customer service, uncover potential problems and recognize the people in the restaurants who solve problems that arise everyday. Not only did he get first hand experience in mopping the floors, working the cash register and dealing with food safety issues, but he also connected with the employees who make the company run. Following the program, David said: "I greatly enjoyed working on the front line and learning more about our great company and the hard work that occurs daily.... I also learned that making a Burrito Ultimo is about as easy as cutting your own hair - I'm lousy at it!" Baja Fresh now operates or franchises 255 Baja Fresh restaurants in 24 states and in Dubai. To see the full episode, click here.



A U. S. District Court in Northern California recently denied class certification to janitorial services franchisees who claimed that the franchise system in question was a "scheme to evade responsibility for janitorial workers wages and job benefits" that hired them as "independent contractors" but exercised such a degree of control over their work as to create an "employer-employee" relationship protected under the California Labor Code. 


Among other requirements, the franchisees claimed that the franchisor controlled their method of cleaning, their cleaning schedule, their contact with customers and their dress.  Citing a 1992 California case, the Court held that a franchisee must show that a franchisor exercised control beyond that necessary to protect its trademark and goodwill to establish an employer-employee relationship and that the franchisees fail to do so in this matter. However, readers of our 2010 newsletters will recall that in March 2010, a Massachusetts Court held that franchisees in the janitorial services business were employees and not independent business operators.


More courts will certainly weigh in on this matter in the upcoming years.



The Third Volume of  The Small Business Lending Matrix and Analysis issued by FRANdata in March 2011 discusses how the lending environment will impact the demand for and supply of capital to finance franchised unit transactions, both new and transferred units, in 2011. The report predicts that the lack of available credit will remain a major hurdle to opening up new franchised units or transferring ownership of existing ones in 2011.


Banks are expected to lend $8.4 billion to franchises this year, an amount that is projected to fall $2 billion short of demand. The anticipated 20% lending gap represents a slight improvement over 2010's estimated 23% gap, thanks to greater investor interest in franchises and increases in Small Business Administration-guaranteed loans, among other factors. In 2010, banks lent an estimated $7.8 billion to franchises, according to the report.


Further, Frandata estimates that this year more than 33,000 franchises - both new units and transferred units - will create or maintain more than 250,800 jobs and generate $32.5 billion of annual economic output. However, the expected loan shortfall is expected to thwart nearly 8,000 unit transactions and the creation of more than 82,000 jobs and $10.7 billion in annual economic output this year, the report shows. For the full report, see this link.



Barry Kurtz's article on this subject was featured in the April 2011 issue of Valley Lawyer.  To see the article, click here.

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
Franchisor 101: Déjà Vu Again
Franchisee 101: Show Me the Money
Contributing Expert - Richard S. Rosenberg, Ballard Rosenberg Golper & Savitt, LLP

Contributing Expert


Richard S. Rosenberg, Esq.

Ballard Rosenberg Golper & Savitt, LLP


Email Privacy Ruling Good for Employers

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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16000 Ventura Boulevard, Suite 1000
Encino, CA 91436