Legal Question in Business Law in California

Mr. Franchise Weighs In - Franchise vs. License

Without knowing more of the facts and expectations, it’s not possible to advise on a specific contract or agreement that would be appropriate. That said, a hybrid license agreement (as opposed to a franchise agreement) that specifies application of California law and venue in California (for disputes) probably makes more sense in this type of situation. But in the final analysis it all depends on the legal and business elements that form the relatiionship. If you’d like to set up an appointment here in San Francisco to discuss everything, that’s a good start. There’s also a lot of information and articles on our website (www.franchisefoundations.com) for you to peruse. Good luck, Mr. Franchise

Re: Franchise Agreement vs. Buy-Sell Agreement

There are numerous ways you can structure this business relationship. You don't mention the current business entity form. You are invited to call to discuss your goals conceptually. You can learn more about my office at cowinlaw.com or call me directly. I can also refer you to a colleague in Sacto if you would prefer.

Re: Franchise Agreement vs. Buy-Sell Agreement

A buy-sell agreement will most likely not serve you appropriately in this situation. While a franchise might, you need to realize that you are dealing not just with United States law but also Mexican law. If he is creating a company in Mexico and running it in Mexico, then any agreement between you and him should be based in large part on Mexican law. Meaning that he might be able to enforce an agreement in California, but you are going to have a hard time enforcing the same agreement in Mexico.

You need to ask yourself a number of questions: 1). What type of control/ownership are you willing to give him with regards to your US operations (if at all)? 2). What type of control/ownership is he willing to give you over the Mexican operations? 3). Does that control allow you to maintain quality over your brand and company in Mexico? 4). Are you willing to spend the type of money required to operate an international franchise/company? 5). What kind of brand ownership is this Mexican arm going to have (i.e. will it use your name, procedures, etc)?

Frankly, this is a complicated endeavour you are talking about if you want to retain standards and control. You might consider a situation where the Mexican Company is created in Mexico, with your company retaining an ownership interest. But this once again depends on the type of control you want to maintain. Either way, you need an attorney who can handle the State side of this transaction as well as Mexican Counsel to assist you in the international portion of the law.

Re: Franchise Agreement vs. Buy-Sell Agreement

I hope you realize that what you need is a set of detailed agreements that provide a full definition of the desires, rights and responsibilities of all parties, which take into account two totally disparate and contradictory legal systems of the two countries, which are ENFORCEABLE to protect your property and rights. This isn't a form you buy at the stationery store. Feel free to contact me if you're serious about getting this done right.

Re: Franchise Agreement vs. Buy-Sell Agreement

I have read the previous answers and generally agree, especially with the recurring theme that you need a custom-drafted contract or group of interrelated contracts that define your relationship. It (or they) would certainly have aspects of a buy-sell agreement, but buy-sell should be considered as a future contingency and not at the core of an on-going business relationship. I would also tend to steer you away from following the franchise model. Your business rrelationship might have some of the attributes of a franchise, but under California law the reelationship of franchisor and franchisee is regulated and subject to limitations that are probably unnecessary for you.

Instead, I think this might be best thought of as a joint venture, with your company providing some of the resources and capital, either by contribution to capital or under a revocable license (know-how, trade secrets, etc.) and the other guy agreeing to put in money, services, and whatever it takes.

The new entity (joint venture or whatever) might be a U.S. operation and itself have a sub-entity in Mexico to carry out operations there.

By the way, I think you mean "upheld" rather than "withheld."