Legal Question in Business Law in California

I am talking to a franchisor who wants to structure the deal in a way that my company (owned by me) will run the operations at the new franchise location but will have the franchisor as a shareholder will 100% voting rights. The way I understand it, this means that it will be my financial investment but the franchisor will have the ability to fire me as the CEO and get into any agreement with anyone. I do not like the arrangement but the franchisor insists he has the same arrangement with other franchisees too. Besides the voting rights, the franchisor will get 8% royalty on revenues. Please advise if this is a common model for franchise agreements or is it a complete non starter.


Asked on 1/05/14, 12:43 am

1 Answer from Attorneys

Let me get this straight. You are to pay 100% of the investment, but will then merely be an at-will CEO who can be fired and they just keep your money? And you even have to ASK if this si a non-starter?

And even if this somehow made business sense, it is a complete violation of franchise law for the franchisor to completely control the franchisee company and its money.

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Answered on 1/05/14, 10:35 am


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