Arizona Franchise Debt Settlement Lawyer
Franchises are supposed to be the “safe” business to start up, especially if you haven’t run a business before. Franchise businesses are appealing to many looking to escape the corporate rat race. And most franchises offer comprehensive training programs and support, as well as marketing, location selection and other types of support. All of this, of course, comes with a cost.
Types of Debt a Franchisee Takes On
In order to get approved for a franchise, it usually takes some cash and a certain net worth. The money needed up front can be a lot. Financing a new franchise business through an SBA loan is also common. Here are just some of the many types of debt a new franchisee can incur:
- Commercial Building Leases
- Commercial Building Loans & Financing
- Restaurant Equipment Leases
- Restaurant Equipment Financing
- Vendor Agreements and Supplier Invoices
- SBA Loans
- Business Credit Card Debt
- Personal Credit Card Debt
- HELOC’s & Second Mortgage Debt to Finance the Restaurant
- Loans from Family & Friends
Franchise Fees & Franchisor Royalties, Advertising Expenses and Costs
The thing that makes franchises unique from other business start-ups is that in exchange for all the support and training, there are often hefty franchise fees and costs paid to the franchisor. These fees are usually paid up front and on an ongoing basis. Some common franchise fees include:
- Franchise Fees. This is the upfront fee the franchisee pays the franchisor for the right to do business as that particular franchise brand. It is usually in the range of $20,000 to $50,000 or more. This does not include business expenses.
- Royalty Fees. The franchisor also gets ongoing payments, which may be based on sales or a fixed amount each month or quarter. The royalty fees are what most franchisees feel in their pocket each month because it can really eat into profits if things aren’t going well.
- Advertising/Marketing Fees. A good national brand will usually have ongoing advertising and marketing campaigns that the franchisee benefits from. Accordingly, many franchisors will charge some sort of recurring advertising or marketing fee in addition to the royalties.
If the franchise business is profitable, all of the above costs may seem quite reasonable. But if it is not, and things go south, the amount of debt a franchisee can find themselves in can be overwhelming.
So what can you do if you find yourself buried in franchise debt?
Attorney Negotiated Franchise Debt Settlement & Defense
A business owner struggling with franchise debt may find themselves fighting a two-front war – one against their lenders, landlord and other creditors and perhaps one against their own franchisor for fees and royalties.
In developing a comprehensive strategy to deal with all the debt and creditors, it is usually necessary to start where things began – by analyzing the UFOC (Uniform Franchise Offering Circular). This is the document that was supposed to discuss and disclose what could be expected from the franchise, the risks involved and many other items.
All franchisors are legally obligated to be truthful and disclose numerous items in the UFOC. Failure to do so can create liability for the franchisor later on. So it is possible that the UFOC and your initial dealings with the franchisor could provide a defense for you to collection efforts by the franchisor.
We will also look at all of the other debt you incurred and put together a complete debt analysis and game plan for resolving the debt. We are knowledgeable and experienced at negotiating debt resolution for business owners, without bankruptcy. We negotiate large reductions in debt that allow the client to settle the debt for a fraction of what the creditor was claiming.
Call today for free consultation with an Arizona attorney.