Franchise Buyers Don’t Need a Lawyer – Yeah Right!

(From a FranchiseHelp.com Blog authored by Jim Meaney)

Okay, so I am biased. But it is a well-developed bias based on years of experience and shattered dreams. And years of hearing the same refrains: “I couldn’t afford a lawyer when I bought my franchise,” “I used the lawyer who drafted my will and he said the contract was fine,” and “I heard I would be wasting my money because the franchisor would not change the contract anyway.”

These excuses are first usually heard when I meet with a franchise owner who is now asking for advice regarding their dissatisfaction with their franchise relationship. Too late. That is, sometimes it is too late to help them.

The best time to seek the help of knowledgeable franchise counsel is when you are buying a franchise. Here are the top 10 reasons why:

1. Franchising is complicated.

2. Unless you have a lot of experience buying franchises, you don’t know what to look for.

3. If you cannot afford a qualified franchise attorney, you cannot afford the franchise.

4. Lawyers who do not practice franchise law cannot effectively help you.

5. Qualified franchise lawyers can educate you on the best way to search for a franchise and how to use their services.

6. Qualified franchise lawyers start with an investigation of the franchise system and the Franchise Disclosure Document, not the franchise agreement.

7. Good counsel can help you avoid selecting the wrong franchise.

8. Knowledgeable franchise lawyers have resources and connections that you don’t.

9. Proper negotiation of a development or franchise agreement is a matter of timing and nuance.

10. The cost of a good franchise lawyer may not be more than 2-3% of your overall investment.

There are many other reasons but you get the picture. Lawyers who practice regularly in the franchise arena (many of whom are members of the American Bar Association Forum on Franchising) can “read between the lines” of a Franchise Disclosure Document, know what is missing, and are able to detect a bad deal or even a scam.

The most effective use of a franchise lawyer may be taking a pass on that franchise deal that could have resulted in the loss of your home, retirement fund and savings account, not to mention that loan from your mother.

Choose wisely but choose an experienced franchise lawyer first!

Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. He is also the author of How to Buy a Franchise. Visit fddlawyer.com or ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or jmeaney@zandhlpa.com.

Parental Liability in Ohio

Authored by E. Ray Critchett

Recently a client came into the office concerning a motor vehicle accident her 16 year-old daughter was involved in. Unfortunately, the daughter suffered serious injuries which required significant treatment and resulted in substantial medical expenses. The mother explained that the at-fault-driver was also only 16 years old and wanted to know what they could do if the liability insurance was not sufficient to cover the expenses.

Unfortunately, this is a common concern in many cases as Ohio continues to allow the state minimum liability insurance policy limits to be $12,500.00. This means if you are injured and have $20,000.00 in medical expenses you may not be able to recover the full amount of your medical expenses, let alone your time off work, or any compensation for your pain, suffering and continued problems in the future. Given the potential shortfall, the mother wanted to know if the at-fault driver’s parents could be held partially responsible to pay for the medical expenses and other damages. Under Ohio law, parents are not typically liable for their child’s actions solely because they are a parent. However, there are exceptions to this general rule.

Under Ohio common law, the three primary ways a parent can be liable for the actions of their child are:

• if the parent negligently entrusts a vehicle or another dangerous instrument, such as a gun, to the child;
• if the parent consents, directs, sanctions or adopts the child’s willful actions;
• if the parent fails to exercise reasonable control over the child when the parents, or should know, that the child is likely to cause harm to another.

Ohio also has three primary statutes that can impose liability on parents for the actions of their child. The statutes are:

1. Ohio Rev. Code §3109.09, Liability of Parents for Willful Damage of Property or Theft by their Children. This statute can impose liability on the parent(s) up to $10,000.00 and court costs if the child willfully damages property or commits acts which would be considered theft. A criminal conviction is not necessary to pursue a remedy under this statute. This statute is likely to apply to cases where there are issues concerning vandalism, theft, or any intentional destruction of property.

2. Ohio Rev. Code §3109.10, Liability of Parents for Willful and Malicious Assaults by their Children. This statute can impose liability on the parent(s) up to $10,000.00 if the child willfully and maliciously assaults someone by a means of force likely to produce great bodily harm. This statute is likely to apply to cases where a child willfully engages in fighting or intentional strikes someone either directly or indirectly (i.e. intentionally runs into someone with their car).

3. Ohio Rev. Code §4507.07, Application of Minor for License or Permit- Signature of Adult-liability. This statute can impose liability on a parent who has signed the application of the minor child for a probationary license, restricted license or a temporary instruction permit. The statue applies to any negligent, or willful or wanton misconduct. However, the imputed parental liability may be avoided if they can show proof of financial responsibility pursuant to Ohio Rev. Code §4509. This statue is likely to apply to any motor-vehicle collisions caused by minor where the minor is not insured. Parents must keep in mind that their own conduct can lead to their own personal liability if they engaged in negligent conduct as well.

If you, your family member or friend have any questions concerning these issues, please feel free to give me a call to discuss the matters in a confidential setting.

You may reach our office toll-free at (855) 2-BUCKEYE or (855) 228-2539; locally at (614) 799-2800 or after normal working hours at (614) 515-5098. You can also send email requests to: ray@buckeyelaw.com

You can also visit us online at: http://www.buckeyelaw/ and http://www.zandhlpa.com/
E. Ray Critchett, Partner.

Disclaimer:
The law firm of Zaino & Humphrey, LPA and its attorneys shall not be held liable for any errors, omissions or inaccurate information contained in this Blawg, or for any actions taken in reliance thereon. These materials have been compiled, reviewed and corrected to the best of the author’s ability. They are presented for educational purposes only and are not considered legal advice. No person should act or refrain from acting on the basis of any information contained in this Blawg. Please seek appropriate legal or other professional advice on one’s own particular circumstances.

Ohio Foreclosure Crisis: Who is at Fault?

Authored by E. Ray Critchett

Unfortunately, many Ohioans continue to suffer from job losses, financial hardships and foreclosures. According to RealtyTrac, a California data supplier specializing in foreclosed real estate, one in every 483 homes in Ohio received a foreclosure filing in December 2010. This totaled approximately 10,523 homes in Ohio that received a foreclosure filing just in December. It is hard to imagine what affect it had on each one of those 10,523 families.

Are all of these foreclosures due to the economic crisis? Yes and no. It is true that most of the foreclosures appear to be due to some form of economic crisis that the homeowner is going through, such as the loss of a job, unforeseen medical expenses, disability or divorce. However, many of the foreclosures continue to stem from predatory lenders offering interest only payments, Adjustable Rate Mortgages (ARM loans) which the homeowner could not afford down the road and other improper lending practices.

The media has recently been ablaze with stories of lending institutions that continue to take advantage of homeowners who are going through an economic crisis and are facing the possibility of losing their homes. There are claims that some lending institutions have filed fraudulent documentation with the Courts in their foreclosures; that banks are foreclosing on homes which they do not own; that banks are receiving federal funding to help their customers avoid foreclosure but then turn around and initiate foreclosure proceedings against the homeowner, and that they use constant delay and stall tactics which ultimately result in foreclosure proceedings.

Fortunately, the tactics and improper practices are being brought to light and the lending institutions are being forced to correct their practices and pay for their actions.

If you, your family member or friend have gone through or are going through a foreclosure action which you believe is unjust, feel free to contact our office to discuss your concerns.

Here are a few common practices to look out for:
1. If you have a Fannie Mae or Freddie Mac loan and are in default or facing foreclosure, you may qualify for federal assistance through the HAMP or HARP program. Be sure that your lending institution discusses both of the federal programs as well as their own programs. Keep in mind, the bank may have a financial incentive to avoid the federal programs;

2. If your lender is using stall or delay tactics by asking you for the same information over and over again, or refuses to respond to your requests for additional information or assistance, you may want to find out if they are using these tactics just to avoid qualifying you for a loan modification or refinance so they can foreclose on your home;

3. Incorrect Invoices. Be sure that your monthly statements accurately represent your loan modification or refinance terms;

4. Review your documents to ensure that all of the information is correct: the correct lender, rates, terms, and payment conditions are just a few of the primary areas to check;

5. Finally, there have been reports where employees for the bank have advised customers to “cash in” their savings and/or retirement accounts to keep current on their mortgage instead of discussing a modification or possible refinance. If the bank is giving you financial advice that does not include a modification or possible refinance, you may want a second opinion.

If you, your family member or friend have any questions concerning these issues, please feel free to give Ray Critchett a call to discuss the matters in a confidential setting. You may reach our office toll-free at (855) 2-BUCKEYE or (855) 228-2539; locally at (614) 799-2800 or after normal working hours at (614) 515-5098. You can also send email requests to: ray@buckeyelaw.com.

You can also visit us online at: http://www.buckeyelaw.com/ and http://www.zandhlpa.com/
E. Ray Critchett, Partner.

The Aging Workforce: An Employer’s Concern?

Authored by Gil Gradisar & Jim Meaney

Employers face many challenges and concerns in today’s workplace. An aging workforce may not be chief among them. However, recent changes in Federal Law and expanded definitions of disability may have a profound effect on how employers deal with these changes in their employees.

Our workforce reflects primary societal demographic trends. We are getting older and so are our employees. The largest segment of our society will soon reach the traditional age of retirement but may have to continue working. White-collar employees will likely outlast their blue-collar counterparts who may be unable to continue their physically demanding jobs. Nonetheless, with the advance in years, come both physical and cognitive limitations that may affect an employee’s performance.

While “age discrimination” may be the most obvious concern, recent amendments to the Americans with Disabilities Act (“ADA”) substantially broaden protections available to aging employees. These expanded protections increase employers’ responsibilities.

Because many employers may not be familiar with the requirements of the ADA, a brief overview can help avoid unwanted legal claims.

The Americans with Disabilities Act

Here are the basics:

• The ADA applies to employers with 15 or more employees;
• The ADA applies to qualified employees with a “disability.” In early 2009, the law was expanded to broaden the definition of disability. In the simplest terms, anyone who has a physical or mental impairment that limits their normal lifestyle or major life activities, will be deemed to have a disability;
• Only a disability which affects a qualified employee’s job performance or their ability to perform any aspect of their job is relevant;
• Once a disability is identified or obvious and it is determined that that this disability affects the ability to perform their job, the employee or their representative may request a “reasonable accommodation” as necessary to perform their job to the satisfaction of the employer. This request for an accommodation must be made by the employee or their representative unless it is obvious that the employee is unable to make the request on their own behalf. As a practical matter, however, when a disability is obvious to the employer, we recommend that the employer take affirmative steps to ask the employee if they want an accommodation;
• When the employee requests accommodation, the employer may ask for reasonable documentation to support the request. That is, doctors’ reports, medical instructions or other supporting documentation related to the disability and the accommodation may be requested to provide guidance on how best to meet their limitation. This documentation can come from a health care provider or rehabilitation professional. There are several avenues available to obtain this information but the request must be limited to the disability and the accommodation issues (in essence, not all medical records, just those relative to the disability and the accommodation sought);
• Once the documentation is obtained or the employer is otherwise adequately informed regarding the limits of the disability and scope of the reasonable accommodation needed, the employer should meet with the employee and conduct an interactive meeting to discuss possible accommodations that may work for the employee and be satisfactory to the employer (the EEOC offers this explanation: The employer and the individual with a disability should engage in an informal process to clarify what the individual needs and identify the appropriate reasonable accommodation. The employer may ask the individual relevant questions that will enable it to make an informed decision about the request. This includes asking what type of reasonable accommodation is needed);
• Employers do not need to provide or accept just any accommodation. An employer's obligation is to provide s "reasonable accommodation" so long as it would not cause "undue hardship" to the employer. "Undue hardship" means significant difficulty or expense and focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation.

Again, while there are many nuances associated with an ADA analysis and each case is different, the basic steps outlined above would generally apply to any circumstance you may encounter at your company.

As an employer, you want to protect and retain valuable employees who maintain your ‘institutional knowledge’ and share your corporate goals. Nonetheless, when the infirmities of age or disability limit their ability to do their jobs effectively, you want to accommodate them without imperiling the performance or culture you work so hard to create. Our job as lawyers is to help you balance those equities within the confines of the law and with the best interests of your company in mind.

If you have any questions about the ADA or other employment matter, please contact Gil Gradisar or Jim Meaney @ 614-799-2800

Starting a Franchise System: Practical Considerations, Planning and Development

By Jim Meaney

As the recession eases, many businesses are looking to their next move – expansion!

With competition from near and far, developing a long-range, viable expansion strategy encompassing branding, marketing, capitalization and legal considerations can be a challenge. Although not appropriate in all circumstances, franchising may be an excellent alternative.

While retail concepts quickly come to mind as most suitable for franchising, recent trends point to the breadth of the use of the model: business-to-business concepts and senior-care/home-care businesses are embracing franchising for rapid expansion. The delivery of medical services is another area ripe for the franchise model as medical providers pursue new methods and approaches.

Before you leap to the conclusion that franchising may be for you, there are some basics you need to know. Franchising is highly regulated in the United States and, in some instances, abroad as well. In the U.S., a mishmash of state and federal laws control the process – most before the sale is made (requiring disclosure and registration) and some at the time of termination. Calling a “franchise” by another name (“start-your-own-business with our help,” a “license” or “business opportunity”) seldom sidesteps application of franchise laws although many businesses have tried.

Current law requires disclosure of 23 categories of detailed information compiled in a Franchise Disclosure Document. Audited financial statements will need to be added after the first year.

The following checklist also offers some of the areas you need to consider:

o History and background of company, competitors, etc.

o Status of current trademarks and service marks

o Whether a new entity should be formed to handle franchise activities, retain intellectual property, etc.

o Potential licensing arrangements between “new and old” entities

o Pre-existing knowledge of franchising mechanics, sales process, etc.

o Discussion about the nature of “franchising business” being a different business from that business which company may currently operate

o Initial concept of franchise sales approach – development territories, single franchise units, master franchise, area development, international expansion

o Any special industry laws or regulations

o Discuss the nature of any previous expansion efforts

o Understanding whether franchise approach is suitable for expansion

o What attributes will be required of the ideal franchise candidate

o Profit margin available to future franchises in light of fees, costs and royalties

o Analysis of current management team’s strength, weaknesses, potential as well as background re bankruptcy, litigation, security violations, etc.

o Plans for training (traditional, online, locations, methods, etc.), training team, written or electronic operating manual development, etc.

o Fees and costs – initial franchise fee, royalties, advertising requirements, FFE, renewal fees, assignment fees, etc.

o Availability of financing for franchisees

o Products or services required to be purchased from franchisor, approved vendors

o Dispute resolution alternatives, choice of law, venue etc.

Although there are many more details to consider, franchising may be a bit easier on the pocketbook. Because franchisees will be investing “start-up funds” in the development of individual units while marketing the brand, franchisors may not need as much capital compared to going it alone.

If you think franchising may be in your future, please contact Jim Meaney (614) 975-9876 jmeaney@zandhlpa.com for a complimentary consultation.

Estate and Business Planning Go Hand-in-Hand

Estate and Business Planning Go Hand-in-Hand
Jim Meaney and Eric McLoughlin

With the daily hustle and bustle of running a business, short-term goals and activities can easily trump long-range planning. The same is true in our daily lives.

When this tendency converges in the life of a business-owner, however, it can produce disastrous results. This is especially so in the event of an owner’s incapacity or death. The business-owner who fails to plan, plans to fail, leaving a costly mess for family members, business associates and employees.

Fortunately, careful planning can avoid unnecessary and expensive complications and greatly increase the likelihood that the business will continue after the owner is no longer able to actively participate in the business. This is true even when “partners” are involved in the business. Integration of your business succession plan with your estate plan is essential to an orderly transition—one that may be the culmination of all you worked for.

Some key issues that should be addressed in the planning process include:

• Who, if anyone, has the necessary skills, experience, and client relationships to carry on the business?

• If there is a suitable successor, how and when will the transition occur? A slow step-by-step transition of power is often more successful, but many business-owners are hesitant to give up control. A structured plan can ease the transition and save the owner and his or her family significant time and money.

• If a partner or partners (aka shareholders, members) are the planned successor, an appropriate buy-sell agreement should be put in place and coordinated with the owners’ wills and other estate planning documents. This protects all parties and saves time and money when an owner leaves the business due to retirement, disability, dispute or death. A buy-sell agreement must address the funding of the buy-out, which can be accomplished with life and disability insurance or a simple promissory note for payment over time.

• If there is no planned successor, the owner must determine whether the business should be sold while still involved in day-to-day operations or after they step down. Tax and other practical implications may drive the decision. For example, a lifetime sale may result in substantial capital gain that could be avoided if the business passes to the owner’s estate and qualifies for a step-up in basis prior to sale. But a post-death sale has costs too, such as the need to obtain qualified personnel to continue the business until a buyer can be found. Naming a qualified executor or trustee is a start, but even that does not assure the business will remain viable until a buyer is found.

There is no single solution to these issues. Each circumstance is different. No perfect plan exists. But unless you start working on your business and estate plan now, chaos will surely reign.

A few tips may get you headed in the right direction:

• Meet with your professional advisers to analyze and evaluate your options. Working with legal counsel and an accountant with experience in integrating personal and business affairs is a plus, but if you are more comfortable with separate advisers (personal and business) consider getting everyone together in a single meeting.

• If a partner is involved, have an orderly plan by preparing a buy-sell agreement that clearly outlines the valuation method, payment/timing process and dispute resolution mechanism if all else fails. This alone can save thousands in legal fees by avoiding time-consuming and expensive litigation.

• If the successor is a family member, conduct a serious evaluation of that person’s skills, strengths, weaknesses, and interest in continuing the business, especially if other family members or the owner’s estate is to receive payment for the business’s value over time. This can avoid family strife after the owner’s exit.

• Consider having the business professionally appraised now so that your advisers can properly estimate the overall impact the value of the business may have on a present sale or your estate.

• Obtain a tax impact review, outlining the tax effects of a present sale versus post-death sale or transfer.

• If an executor or trustee is charged to seek a buyer after an owner’s death (not always an ideal situation), make sure that person is qualified, has the latitude to retain professional assistance, as well as the liquid financial resources to execute the sales transaction.

Preparing for the future is never easy, especially when it is in contemplation of your own incapacity or death, but taking some time now can avoid an expensive and complicated transfer or sale in the future. Plan to succeed by planning now. Your loved ones will be grateful you did.

Jim Meaney and Eric McLoughlin are attorneys with the law firm of Zaino & Humphrey, LPA in Dublin, Ohio. jmeaney@zandhlpa.com and emcloughlin@zandhlpa.com (614)799-2800.

Business Insurance Claim Challenges

Business Insurance Claim Challenges
Jim Meaney and Ray Critchett

Protecting your business with a business insurance policy is not only wise but essential. But when a claim is made – either by a third-party or for direct coverage – your protection may be called into question by a surprising source, your own insurance company. A significant claim can lead to a frustrating chain of events.

As a result, businesses need to be vigilant about their insurance coverage and pursue denied claims when appropriate. In a tight economy, every dollar counts. And, the economy is likely impacting your insurance company’s pocketbook as well. Declining investment values cause insurers to look to other means for financial stability, and cutting costs by limiting claims is at the top of the list. Experience also indicates that some insurers will initially deny valid claims in the hope that the insured business will simply accept this fate.
So what can a business do to make sure it is getting the coverage that it paid for?

Here are a few tips that can help you get the full value of your policy:

• Know the policy

Quite simply your insurance policy is nothing more than a contract. You need to read it and understand it. There are two times when you may be motivated to do this: when you buy it and when you have a claim. When you first purchase your policy, you should outline it and save the outline as a quick reference guide in the event of a claim. Also ask your agent or the company to provide a summary of coverage and conduct annual coverage reviews with your agent and broker. The scope of the general commercial policy may be broader than you think. Don’t overlook the Riders or Addenda as these tend to limit coverage stated in the main policy. When you believe you have a covered event or claim review your outline, the summary and the policy. But regardless of what you may think is covered, notify the agent or insurance company in writing about the potential claim – coverage language can be steeped in legalese and may not easily reveal itself.

• Closely review any notice or letter

Once a claim is submitted to an insurance company you can and should expect all matters to be handled in writing. Even approval letters may look like denials as insurers “reserve rights” and state other conditions of coverage. Typically, insurance companies have two primary duties: a duty to defend the claim (usually with an attorney and/or a claims representative) and a duty to indemnify (actually paying on the claim to the extent of the coverage). Here you need to read between the lines. If they insurance carrier is defending the claim under a “reservation of rights,” they are telling you that your company may have to pay the liability, if any. You need to ask the insurance company whether or not they are going to provide a defense, whether or not they are doing so under a “reservation of rights” and you should also ask what the potential liability exposure may be in case it exceeds your policy limits.

• Why is the claim being denied?

If the letter indicates that your claim is denied, understand exactly why. Ask the insurance company to provide you with a detailed letter explaining all of the reasons for denial. Pull out your outline, any summary and the policy and compare it to the letter. Insurers attempt to be very specific here, citing page, section and subsection to support their denial. A close review can reveal flaws in their position or that they are simply dead wrong. Remember, just because the insurance company says it is so does not make it so. Sometimes the facts they rely on are not your company’s circumstance. Don’t stop there. Contact your agent and ask for their review, advice or intervention. Maintaining a close relationship with your agent or broker can go a long way. Your agent wants you to be covered and satisfied. But if the claim is serious enough you may also want to immediately contact your legal advisor.

• Lodge your challenge

If you do not agree with the denial, put it in writing. Whether you do it yourself, through your agent or legal advisor, state your challenge clearly and simply, support it with facts and the language of the policy, and set a deadline for response. Most important of all, don’t give up. Insurers are bureaucracies and oftentimes it is a matter of getting through to the right person, the decision-maker. Sometimes becoming the “squeaky wheel” will be enough especially if the insurer was banking on you disappearing by their mere denial of your valid claim. Again don’t give up, particularly if the policy or the denial is unclear – because the insurance company wrote the contract the law always favors the insured business.

• Consider a legal challenge

Insurance companies rely heavily on legal counsel when they prepare policies and when there is a coverage dispute. So why shouldn’t you? If the value of the claim is significant enough or the potential cost of defense of a claim brought by a third-party expensive enough, legal counsel may be a bargain. Again, the mere involvement of counsel may be enough to persuade the carrier to grant coverage. If not, then bringing an action in court may be a last but necessary resort. Finally, if the insurance company has engaged in a “bad faith” denial, you may be able to recover the attorney fees and costs as well.

Jim Meaney and Ray Critchett are attorneys with the law firm of Zaino & Humphrey, LPA in Dublin, Ohio. jmeaney@zandhlpa.com and rcritchett@zandhlpa.com (614) 799-2800.