The Franchise Newsletter - Fall 2017 Issue

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Changes in Item 19 Disclosure Requirements Take Effect Next Week

By Chuck Modell

We have previously written about the changes required to Item 19 disclosures based upon the adoption in May of the new NASAA financial performance representation (FPR) commentary. If your franchise disclosure document (FDD) has an effective date of May 9 or later, then you only have until next Saturday, Nov. 4, to update the Item 19 disclosures in your FDD. If your effective date is May 8 or earlier, then you are not required to comply with the commentary until 120 days after the end of your fiscal year, which is basically when you must update and renew your FDD. However, if you amend your FDD before your next renewal, regulators in some of the registration states will require Item 19 be updated at that time.

Chuck Modell Receives ABA Forum on Franchising’s Lewis G. Rudnick Award

We are delighted to report that our long-time shareholder, Charles S. Modell, was honored with the Lewis G. Rudnick Award at the 40th Annual American Bar Association Forum on Franchising in Palm Desert, California, on October 19, 2017. The Rudnick Award honors franchise lawyers who have made substantial contributions to the development of the ABA Forum and to franchise law as a discipline and are recognized as accomplished practitioners of franchise law. Most importantly, recipients of this lifetime achievement award are esteemed for comporting themselves in accordance with Lew Rudnick’s high standards of professionalism, decency and collegiality. Chuck is only the ninth recipient of the award.

Chuck has been a dynamic leader in franchising for four decades, sharing his wisdom and insights in scores of speaking engagements, more than sixty published articles and service on the most important industry organizations, including the Governing Committee of the American Bar Association’s Forum on Franchising, as the Forum’s Financial Officer and as chair of the annual Forum on Franchising.

“Chuck has formally and informally mentored scores of franchise lawyers, both inside and outside of our firm,” noted Joe Fittante, chair of Larkin Hoffman’s Franchise and Distribution practice and past chair of the ABA Forum on Franchising. “His able counsel and advice to so many of today’s leaders will continue to shape our profession long into the future.”

Among his colleagues at Larkin Hoffman, Chuck has earned the greatest respect for his accomplishments in practice, business acumen, absolute dedication to client service, firm management and high standards of professionalism, decency and collegiality. “Chuck is a great lawyer, colleague and truly one of the deans of the franchise bar,” said Bill Griffith, president of Larkin Hoffman. “I can think of no one more deserving of such a great honor.”

SBA Makes it Easier For Franchisees to Obtain Financing

By Sawan Patel

The Small Business Administration (SBA) has simplified the SBA loan process for franchisees, effective Jan. 1, 2018. The SBA has created a new SBA Franchise Directory, which lists all franchises reviewed by the SBA and eligible for SBA loans. Franchisors who were approved in 2015 or 2016 under the old franchise registry can continue to use the documents that were approved at that time as long as they have made no substantial changes to the control provisions of their franchise agreements. Likewise, franchisees of franchisors willing to sign the SBA’s standard addendum that was created in February 2017 may continue to obtain loans using that addendum.

However, for franchisors who were not previously listed on the franchise registry or who will not accept the 2017 standard addendum, there will be another option. Unlike the old process that required franchisors to submit their franchise agreements for review by FranData each year – at a significant cost to franchisors – franchisors who would like to be on the newly created SBA Franchise Directory may register directly with the SBA. They must submit the franchise agreement, franchise disclosure document, and all other documents they require the franchisee to sign to franchise@sba.gov for an affiliation and eligibility determination. The SBA will determine what, if any, addendum is required. There is no cost to submit a franchise to the directory. Franchisors who are listed in the directory must submit by April 30 an annual franchisor certification (certifying that no terms which would jeopardize SBA eligibility have changed) to renew their listing annually.

The SBA is accepting applications now under the new process. Franchisors should check with their counsel to determine the advantages of being approved for SBA loans, and what is required to be listed on the SBA Franchise Directory.

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Fall 2017 Issue

Our Professionals

Charles Modell, CFE

Joseph Fittante, Jr.

Mark Robertson

James Susag

Andrew Perrin, CFE

William Thornton

Susan Tegt

Sawan Patel

Inga Schuchard

Bryan Huntington

Henry Pfutzenreuter, editor

Jill Henson

Jan Jahn

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Larkin Hoffman provides counsel to a wide variety of ‎organizations, from ‎small businesses and nonprofits to Fortune 500 companies, in ‎many areas of practice including ‎corporate and governance matters, litigation, real ‎estate, government relations, labor and employment, intellectual property, ‎information technology, ‎franchising and taxation. The firm also serves the needs of individuals in many ‎areas ‎including trusts and estates, personal injury and family law.

This newsletter is provided as a service to our clients and firm associates. While the information provided in this newsletter is believed to be accurate, it is general in nature and should not be construed as legal advice.