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What's a Trust?

2010 November 7 by

A trust is a legal arrangement where a “grantor” transfer legal title to property (e.g. real estate, investment accounts) to a “trustee.” The trustee holds the property for the benefit of the beneficial title holder or “beneficiary.” The trust sets forth the terms and conditions by which the trustee is to manage the property held in the trust. Most trusts have one set of beneficiaries during the grantor’s life and a different set after the grantor’s passing. Trusts can be established for a variety of purposes including avoiding probate, reducing estate taxes and providing creditor protection..

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Understanding the FDD

2010 November 3 by

So you’ve decided that buying a franchise is right for you. Congratulations! Whether you are working with a broker (or consultant) or pursuing this opportunity on your own, you need to conduct your due diligence. This means, among other things, that you need to validate the model and verify the financial information. Towards the end of this due diligence period is a good time to have an attorney review the FDD and Franchise Agreement.

The FDD


The FDD is a formulaic document, required of all franchisors, by the FTC. Since not all franchises are the same, the standardized format of the FDD allows potential franchisees to compare apples to oranges (as much as possible). A good analogy is to consider the FDD as a federally regulated and mandated brochure.


Every FDD consists of 23 Items. Each Item must contain specific facts about the franchise and all material obligations and limitations that appear in the franchise agreement must be disclosed in the FDD, in the appropriate Item. Additionally, there will be a number of Exhibits accompanying the FDD, including a copy of the Franchise Agreement and ancillary agreements with the franchisor or specified vendors.


The FDD is not a negotiable document. It is a uniform disclosure of the required information, which must be provided to every potential franchisee. The FDD must be updated annually, within a specific number of days of the closing of the franchisor’s fiscal year – typically new FDDs are issued in April or May.


Some states require the registration of the FDD and franchise agreement, some do not, and some will allow an exemption from their registration requirement. Regardless, no governing body verifies the information, accuracy or truthfulness of the FDD. This is why it is imperative that you perform your due diligence in a thorough manner.


Despite the rigid disclosure requirements, not all of the terms of the franchise agreement are covered in the FDD. Do not rely on a review of the FDD as a summarization of your franchise agreement. Instead, use the FDD to help compare franchise opportunities as you narrow your decision, to help you in your validation process, and to orient yourself as to the specifics of a particular franchise.


Attorney Review


Why should you have an attorney review the FDD and Franchise Agreement? Can your real estate attorney or the attorney that drafted your will review it? An attorney familiar with the FDD format and requirements will read it with an eye to ensure that you are being fully disclosed and will be able to interpret information that you might otherwise just gloss over. Ideally, a legal review of the FDD will include a comparison with the terms included in the Franchise Agreement for consistency, confirmation that all required information is included, and notation of any “red flags” (such as incorrect start-up cost disclosures).


While any licensed attorney is capable of reading and digesting an FDD and Franchise Agreement, one that is not familiar with customary terms and language may be inclined to try to negotiate more favorable terms on your behalf. Only an attorney experienced in the review of FDDs and Franchise Agreements will know what terms, if any, are typically negotiable and when it’s acceptable to “push back” against the franchisor..

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What's Probate?

2010 November 1 by

Probate Administration is the process by which a decedent’s property (i.e. “the estate”) is passed to the decedent’s heirs, devisees and legatees. A probate court oversees the administration process and, in MA, it may take at least one year to complete, and cost several thousand dollars. In addition, the heirs, devisees and legatees may not have immediate access to the decedent’s assets until the administation has begun. Fortunately, there are several planning methods available to eliminate and/or reduce the need for a probate administration including the use of trusts & jointly held assets.

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