Legal Question in Business Law in California

Re: Franchise Agreement

I am a little bit confused by the situation. It sounds like what you are saying is the franchise is still in your name and was never owned by the corporation. It would appear that if the franchise was never part of the corporation, it would not need to be "closed down" with the corporation. As for getting out of the FA... that depends on the agreement. Generally the franchise has certain responsibilities and if they are not upholding those responsibilities, then you should have some recourse, possibly to end the franchise agreement. You would need to see an attorney who could look over the franchise agreement, find the full facts of the situation, and give you an educated opinion as to your options. I would add that franchise agreements are generally weighted heavily towards the franchisor (especially if you did not have an attorney help you with contract review and negotiations). Despite this their are usually options available to a franchisee who is being ill-treated.

Re: Franchise Agreement

This can probably be sorted out with a little effort. Based upon the failure of the franchisor, if your goal is to simply walk away, that is probably do-able. Feel free to contact me if interested in getting the legal help to do so.

Re: Franchise Agreement

When I read "Real EState Franchise," I naturally think of outfits like Century 21, United Farm, etc. where the business is arranging purchases and sales of real property. This requires a license. You didn't say who holds the license here; it could be you, it could be the corporation, or it could be a third party. The franchisor, with good reason, would probably not assign or permit the assignment of the frnachise to an unlicensed entity. This may have been the problem here, or part of the problem.

If the corporation never held the franchise (due to it never being assigned to the corporation), then how did the franchise become a d/b/a of the corporation? Did you allow the corporation to operate under the franchise name when all the time you knew the corporation wasn't the franchisee? (Possibly you didn't discover until recently that the corporation wasn't the franchisee.)

In either case, I'd say that the possibility of personal liability and damage to the franchise are possible consequences of the corporation's failure. I'd also think there may be a DRE rules violation regarding broker licensing lurking here.

Re: Franchise Agreement

You are most likely personally liable to the franchisor. Generally, in franchise agreements, the franchisor will require a personal guaranty from a person. The franchisor doesn't want a promise from a corporation with no assets or credit. So, even if the franchisor agreed to an assignment, it will still have required your personal guaranty, or otherwise would not have released you from liability under the franchise agreement. With regard to the advertiser, the corporation is probably only liable. To dissolve a corporation, some person usually has to assume liability for debts. You may want to reconsider dissolution at this time, depending on the circumstances, and especially depending on the amount of the debts owed. This is something you should consult with an attorney about. Lastly, yes you can negotiate an early termination of your franchise agreement.

We have handled franchise disputes and related matters in the past. If you have any questions or need further assistance, feel free to call or email.