Home -> Law Blog Directory -> International Law Blogs -> Misleading Advertising Law

International Law

: Misleading Advertising Law

Surviving Franchisor Bankruptcy

Generally, I find the articles about franchising at allbusiness.com reasonable, but not compelling.

However, I put this article about dealing with your franchisor's bankruptcy or insolvency pretty decent. Here are three suggestions, but read the entire article.

"Keep a list of alternative suppliers. Sometimes the first problems occur with suppliers who might be nervous about getting paid. Plus, if the franchisor can't provide supplies, a franchise must look elsewhere. Before you encounter a distributor catastrophe, develop a list of viable and trustworthy suppliers.

Maintain a backlog of supplies. If your franchisor declares bankruptcy, it could leave you without an adequate amount of supplies. Avoid this scenario by keeping a surplus of items you might need but cannot obtain in the event of a bankruptcy.

Make sure that the community knows that you're independently owned. You don't need to remind your customers on a daily basis that you're independently owned, but you do need to establish your business as a separate entity from all the other franchises.

Letting fellow business owners know is one way to get the word out. Becoming involved in the community is another. The more "local" your business feels the better. Many customers tend to favor locally owned businesses over nationally owned ones."

It is also important for the group to get together and find out their options under bankruptcy if some franchisees want to acquire their leases.

Many times in bankruptcy, the trustee wants to disclaim the leases to preserve cash flow. This presents the franchisee with an opportunity to control more of their destiny by obtaining the head lease.

Related articles

• China's New Bankruptcy Law: Slow Train Coming [via Zemanta]
• US business bankruptcies rise [via Zemanta]
• What's a franchise territory worth? [via Zemanta]

Full post as published by Misleading Advertising Law on June 11, 2008 (boomark / email).