Business Contracts Confidentiality Agreement and trademark licensing - How does this affect me?

[fixx74]

I recently started a business in California. It was a business a friend started in another state and had great success. He wanted to francise the business and asked my if I would help by starting a location in another state. So I moved to California to help create a west coast presence.

I signed a confidentiality agreement and the trademark licensing agreement before I made the move. But ever since I have been out here they have offered no support, there is no operations manual, and they keep changing all the rules. They now want franchise fees and royalty fees. Yet, they have done nothing but hold me back from progress. It seems they were not properly prepared to franchise like they implied they were.

They are now trying to make me sign more contracts stating they would be 75% owners of my location. This doesn't sound like a franchise, but more like a bad partnership. Now I am heavily invested into this location and have signed a years lease on a property. Is there anyway I can keep doing business, while separating myself and my operations from them?

Please help!! Any advice is greatly appreciated.

 

[Michael Wechsler]

I am sorry to hear about your problem.

I hate to be the one to tell you this, but this sounds like a very messy situation. I don't know what agreements you have already signed but your instincts are correct - you shouldn't be signing away the business now because they have awakened. You moved out there based upon what may be a verbal agreement. If the owner is truly a friend of yours, then I would do my best to try to salvage the relationship by working it out. You may tell him that the deal is the deal you struck and that you invested time and money based upon that deal and understanding. The rules can't change afterward.

Many times people believe that verbal agreements are not binding. Of course they are, especially when "equity" or fairness is involved, e.g. you detrimentally relied upon his terms and acted upon them. You may wish to explain this to your friend otherwise you may need to go to court to enforce the deal. My guess is that this will be complicated but now would be a good time to review and organize all your emails. If negotiation doesn't work, there is no question - I think you need a lawyer to review your documentation. In fact, I'd say it would serve you well to get a consultation with an attorney who can review all of your documents and agreements and better state your position than we can here in the forum. Good luck.

 

[sunnymoon]

Did you sign any contracts with your friend about how he would support the franchise?
Do you know if there is any law saying that franchiser has to have at least some certain support for franchisee?

 

[Michael Wechsler]

Did you sign any contracts with your friend about how he would support the franchise?
Do you know if there is any law saying that franchiser has to have at least some certain support for franchisee?

Excellent questions. My intuition from what the original poster stated was that he probably had verbal agreements and it's why I asked him if he signed anything with his friend. Unfortunately, we'll find out just how strong the bonds of friendship are after having a discussion about resolving matters.