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Acquisitions
of franchise businesses frequently hit the
headlines without standing out from other M&A
deals. And in many ways buying a franchise
business can be like acquiring any other business
in that the transaction process and legal
documents are indeed the same. However, there are
a few important differences which arise out of the
particular characteristics of the franchise
business model:
- any due diligence will need to be tailored
to the franchise business model, i.e. it will
need to investigate the structure of the
franchise system, the quality of franchisees,
whether franchisees have left the system and the
reasons for such departures, the franchisee
failure rate, the manual and training system and
other elements that contribute greatly to the
success or failure of a franchise business;
- franchise-specific warranties should cover
such matters as compliance with franchise
disclosure and registration requirements,
franchisee terminations, franchise litigation
and similar requirements;
- acquiring a franchise business may also
raise specific merger issues, for example in
relation to the calculation of turnover on a
system-wide basis;
Joachim
Sander, John McLaughlin and Babette
Märzheuser-Wood have now published an article in
the September issue of the UK's leading company
law journal ("PLC") entitled "Acquiring
franchise businesses". The article also
provides a concise overview of different
franchising structures.
If
you require any additional information, please
contact Babette
Märzheuser-Wood or Joachim
Sander.
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