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Many executives seem
unaware that the acquisition of even a domestic
franchise business can trigger disclosure
obligations in other jurisdictions. Even though
the acquisition of a franchise business may (i)
appear purely domestic in nature, and (ii) have
little affect on the day-to-day activities of
franchisees, these foreign laws can bite and
expose the purchaser to severe penalties and
sanctions.
Disclosure
Countries
When a franchisor sells
its franchise business it is common for existing
unit franchise agreements in other jurisdictions
to be transferred to the purchaser. Sometimes this
is combined with the grant of a master licence to
the purchaser. This common type of deal structure
will almost certainly trigger disclosure
obligations not only in countries with established
disclosure laws (for example, Australia, Belgium,
China, France, Italy, Malaysia or Spain) but also
in countries without such laws (for example,
Austria, Germany, Portugal or Switzerland). Please
note that:
- The grant of a master license
can trigger a disclosure obligation as between
the franchisor and the purchaser.
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- A change of franchisor can
trigger a disclosure obligation as between
franchisor and existing unit franchisees.
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Practical Difficulties
In recent months we have seen a large number of
multi-jurisdictional acquisitions involving
franchise businesses. To focus on potential
international disclosure obligations at the outset
of such transactions is crucial and can save a lot
of time later on. It is also important to consider
the impact of disclosure requirements on the
structure of the deal as a whole, for example, in
order to deal separately with those countries that
do have a lengthy disclosure period.
For
further information about this please contact Babette
Märzheuser-Wood or Joachim
Sander.
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