Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Thank you for your questions: 1. A franchisor must provide the franchise disclosure statement/proforma before the franchisee purchases a franchise. The intent of the statement and proforma, as I'm sure you are aware, is to allow the franchisee to make an informed decision. The information to make that decision must be presented before the decision is made. 2. A franchisor may not show a potential franchisee a proforma on which they're basing their purchase decision and then change that proforma prior to the purchase without informing that prospective franchisee of the change. Franchise requirements vary from state to state, but in general there will be a requirement that proformas be up to date and that interim financials be provided if the presentation of the disclosures falls outside a certain window after the last financials were prepared. Disclosures can be updated after the sale of a franchise-- facts and numbers do change as time goes on-- but there cannot have been any misrepresentation in the original disclosures. 3. Unless there's some underlying issue, buying gifts for franchisees who have purchased multiple units is legal. Where it could be an issue is if the gifts were extremely lavish and the shareholders of the franchisor were concerned that the officers of the franchise were not being fiscally responsible. Depending on the franchise fee, giving a $3-5k gift to someone buying multiple franchises could possibly be a good business move.
Or at least it could be argued that it was a good business call.
Please don't hesitate to let me know if you have any additional follow up questions.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).