Agreements and Contracts

Franchise Disclosure Requirements

Franchising your business is an exciting process and an effective way to expand your commercial footprint. However, there are numerous federal and state laws that must be complied with before you can offer and sell franchises to potential franchisees. The Federal Trade Commission (“FTC”) is the federal agency governing the sale of franchises and its regulations are commonly referred to as the “franchise rule.” See 16 C.F.R. Part 436. This rule was created to protect consumers who are considering investing significant funds into a franchise business. The franchise rule requires franchisors to provide prospective franchisees with certain information related to the business and the expected investment in the business. This disclosure is known as the Franchise Disclosure Document or Uniform Franchise Disclosure Document (“FDD”), and must be provided to the franchisee at least fourteen (14) days before any agreement is signed or before any initial money is exchanged. The FDD was previously known as the Uniform Franchise Offering Circular (“UFOC”) before it was revised by the FTC in July 2007. What Must be Included in the FDD The FDD must contain information deemed essential to potential franchisees. This information must be structured in a particular format and be written in “plain English” rather than legalese. The FDD must include: 1. A description of the franchisor’s company, its history and any relationships it has with affiliated companies; 2. Professional biographies of the franchisor’s officers, directors and executives; 3. A description of current and past criminal and civil litigation involving the franchisor and its management; 4. A description of any bankruptcy petitions filed by the franchisor and its management; 5. Identification of any initial fees required to be paid to the franchisor or any affiliated company, such as the initial franchise fee; 6. Identification of all other recurring fees and payments that

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The Letter Of Intent

Most complex commercial transactions, such as merger and acquisition agreements and joint venture arrangements, are reduced to writing and memorialized in a formal written contract.  Negotiating these complicated transactions and arrangements, however, can be time consuming and require parties to devote significant amounts of resources before a formal agreement can be finalized.  Additionally, other opportunities may be lost by one or both parties while they complete the negotiation process and draft the final contract.  It is understandable, then, that parties entering into such transactions or arrangements might want something in writing indicating that the other party is serious about reaching a final agreement.  A letter of intent, or LOI, provides such reassurance. A letter of intent typically contains an outline of an agreement between two or more parties that will be memorialized in a more detailed, formal written contract at a later date.  A typical letter of intent is relatively short and written either in an outline or abbreviated format because the details of the agreement have yet to be negotiated and/or agreed upon by the parties.  Think of it as an agreement to reach a final agreement. It serves as a roadmap for future negotiations between the parties and as a guide for all subsequent negotiations while the final agreement is being hammered out.  The thought being that a letter of intent tends to facilitate an agreement on the remaining terms and provides a certain level of significance to the parties’ negotiations.  With an executed letter of intent, the parties are signaling to one another that they are serious about making the transaction happen. Are Letters of Intent Binding? Letters of intent can be binding, non-binding or partially binding, depending upon the intent of the parties and the express language in the letter of intent.  For the most part,

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Non-Compete Agreements in Florida

Has a potential employer asked you to sign a non-compete agreement as a condition of employment or has your current employer asked you to sign one because you have been offered a promotion within the company? Maybe you signed one when you accepted your current position and you now wish to resign that position, but you are concerned about how the non-compete agreement will impact your ability to accept a new job after you resign. In all of these scenarios, it is imperative to understand what a non-compete agreement is, whether it is enforceable in the State of Florida, and what are the consequences if it is enforced. What Is a Non-Compete Agreement?    A non-compete agreement, also referred to as a “covenant not to compete,” a “non-competition clause” or a “restrictive covenant,” is a contract between an employer and an employee in which the employee agrees not to enter into competition with the employer during and/or after employment.  It is easy to see why an employer might feel the need for a non-compete agreement under certain circumstances. From an employer’s perspective, the employer wants to prevent an employee from going to work for a competitor or starting a competing business, and making use of trade secrets, customer lists, business practices or other sensitive information obtained while employed by the employer. For example, assume you work for a software company selling one of its products. As a sales representative, your employer has spent time and resources training you on how its product works, has introduced you to its customers and paid you to develop relationships with these customers, and has provided you with information regarding the pricing of its product which, in many instances, is not public information.  Without a non-compete agreement in place, there is very little stopping you

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Potential Pitfalls of a Commercial Lease

If you are a small business owner, chances are good that you will need to lease commercial space at some point. Whether you need to find somewhere to house your office, a retail storefront or warehouse space for your products, understanding how commercial leases work and knowing about potential pitfalls ahead of time can help you avoid costly and time-consuming problems in the future. Understanding the Types of Commercial Leases In a commercial lease, you pay a certain amount of rent for each square foot of space.  There are two main types of commercial leases: gross leases and net leases. Gross Leases. A gross lease essentially means that the rent you pay per square foot includes all expenses, including real estate taxes, utilities, and maintenance. Net Leases. In a net lease, your rent amount per square foot is lower, but you’ll pay additionally for three categories of expenses: taxes, insurance, and common area maintenance (CAM) expenses.  There are different types of net leases, including single net leases, double net leases and triple net leases.  In a single net lease, the tenant is response for one of these categories of expenses, for example, taxes.  In a triple net lease, the tenant is responsible for all three categories of expenses: taxes, insurance and CAM fees. Spotting Potential Pitfalls No two commercial leases are the same and reviewing a commercial lease can be a challenging task for a prospective commercial tenant.  Additionally, there are fewer laws protecting consumers when it comes to commercial leases, as business owners are expected to be more savvy than individuals leasing residential properties.  By understanding key provisions and negotiating terms most favorable to the tenant, a commercial tenant is able to mitigate his or her risk and liability in the event of an unforeseen circumstance. Here are a

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Are Verbal Agreements and Contracts Valid in Florida?

Over the course of a single week, you likely enter into a wide variety of agreements and contracts. If you own a small business, you may negotiate agreements and contracts on a daily basis. Many of these agreements are probably verbally negotiated and sealed with nothing more than a handshake, which may not seem problematic until the other party fails to perform according to the terms of your agreement. When that happens, questions arise including are verbal agreements legally binding in the State of Florida?  And, can a verbal agreement or contract be enforced? Elements of a Contract To form a valid, legally binding, contract you need three elements: an offer; acceptance of that offer; and consideration.  The first two elements, offer and acceptance, are fairly self-explanatory. Imagine that you list your car for sale for $2,000 in a local newspaper. Your neighbor sees the advertisement and stops by to tell you that he wants to purchase the vehicle for the asking price of $2,000. Your initial advertisement is the offer and your neighbor’s statement that he wants to purchase the car for the asking price is the acceptance.  The third element, consideration, is a legal term that refers to something of value. For a contract to be formed, there must be consideration. In the example above, the $2,000 your neighbor pays for the car is the consideration required to complete the formation of a contract. When Do Offer, Acceptance, and Consideration Not Create a Valid Contract? There are some situations in which a legally binding contract is not created even when the required three elements are present. For instance, if one of the parties to the contract lacks the mental capacity to enter into a contract, the contract is not legally binding. John Knox Village of Tampa Bay, Inc. v.

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