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Emerging Companies Insider

The Emerging Companies Insider blog focuses on recent and developing areas of the law affecting startup and emerging growth companies and their investors, including choice of entity, shareholders’ agreements, issuance of equity to employees, preparing for and executing a capital raise, exit strategies and the JOBS Act and its impact on how companies can and should raise capital from investors.

Franchise Law Update

For those with an interest in the world of franchising, the Franchise Law Update blog will become a regular stop for you. Our bloggers discuss not only the regulatory aspects of franchising, but also diverse topics such as business finance, employment, litigation and the protection of intellectual property including trademarks and copyrights. We understand that while franchising has its unique aspects, franchise businesses confront the same opportunities, changes and challenges as any other business.

Recent Blog Posts

  • Is Your Agreement to Arbitrate Valid? Many franchisors employ arbitration as its preferred method of dispute resolution.  Generally, courts view arbitration agreements favorably. An agreement to arbitrate waives the fundamental right to have a court decide the merit of their disputes. As such, valid, enforceable arbitration agreements are required to waive this essential right. Two recent decisions highlight the importance of ensuring that a valid agreement to arbitrate exists between the parties. Copyright: designer491 / 123RF Stock Photo Theo’s Pizza, LLC v. Integrity Brands, LLC In this case, the franchisee... More
  • Not a Minor Issue! FTC updates COPPA Compliance Plan This week, the Federal Trade Commission (FTC) updated its guidance for businesses on complying with the Children’s Online Privacy Protection Rule (COPPA) .   If a website operator or operator of online services collects personal information from kids under 13, then the business must comply with COPPA.   The definition of “personal information” is broad and includes a child’s name, voice, address, photo, email address or telephone number.   COPPA encompasses a wide range of activities, including mobile apps and toys or other products connected to... More
  • Fiduciary Duties After Pennsylvania’s Act 170 Ethan Zook writes: As was alluded to in a prior blog post, one of the major changes that has been enacted through Pennsylvania’s Act 170 is the ability, through the operating agreement, to contractually vary fiduciary duties of members and managers in Pennsylvania limited liability companies. What Fiduciary Duties? Copyright: somartin / 123RF Stock Photo There are two major fiduciary duties to be aware of: the duty of care and the duty of loyalty. The fiduciary duty of loyalty is comprised of five subsections which... More
  • Term Sheet Terminology:  Cumulative vs. Compounding Dividends Issuers and investors are well advised to document their deal in a term sheet.  Though generally non-binding, they add significant value.  Detailed term sheets raise issues early when there is still ample negotiating time. They also make drafting the definitive documents more efficient, saving on legal fees. However, parties must be vigilant to document the deal properly, especially when using terms of art. Copyright: seamartini / 123RF Stock Photo For example, one commonly negotiated item on preferred stock is the dividend. Dividends... More
  • What State’s Law Applies to a Non-Compete Agreement and Why Does it Matter? Employers frequently require employees to sign confidentiality and non-competition agreements.  In most jurisdictions, these agreements are both lawful and prudent provided that they are carefully drafted. In my practice, I draft confidentiality and non-competition agreements and litigate claims of breaches of those agreements.  In almost every agreement I either draft or review, there is a choice of law provision.  If I am drafting or editing the choice of law section, I do not just randomly select any state or a state... More
  • So You’re Looking to Exit – What if I Breach a Representation or Warranty? As mentioned in the first post of this series, the goal of many entrepreneurs is to seek venture capital financing or ultimately sell their company in an “exit” merger or acquisition. Upon making representations and warranties (which are essentially, assurances) associated with any of these transactions, the seller opens itself up to risk. If these assurances turn out to be false or are breached, the seller is subject to suit for breach of contract. Often, however, the parties negotiate an... More
  • Massive Ransomware Attack WannaCry Spreads Worldwide On Friday, May 12th, ransomware known as WannaCry (also known as WannaCrypt or WCry) spread throughout the world, affecting more than 100,000 systems in 150 countries. Victims of the massive cyberattack included the NHS in the UK, cellular networks in Spain, universities in China and many other large organizations worldwide. For entrepreneurs who are dependent on Windows systems to run their companies, the attack highlights the significant risks and high costs associated with keeping cybersecurity on the back burner. Fox partner Mark McCreary... More
  • The Next Frontier in ADA Access Litigation: Online Copyright: byzonda / 123RF Stock Photo Are you ready for the next frontier in ADA Access Litigation? We invite you to read Part 1 and Part 2 in a series of posts by Fox partner Dori K. Stibolt, regarding the new trend in ADA Title III litigation involving access to the internet for the visually impaired. Many of these cases have focused on travel, hospitality, restaurant and service companies which necessarily include many companies in the franchise community.  Additionally, claims related to web access for... More
  • Massive Ransomware Attack WannaCry Spreads Worldwide Copyright: mikkolem / 123RF Stock Photo This past Friday, May 12th, ransomware known as WannaCry (also known as WannaCrypt or WCry) spread throughout the world, affecting more than 100,000 systems in 150 countries. Victims of the massive cyberattack included the NHS in the UK, cellular networks in Spain, universities in China and many other large organizations worldwide. For both franchisors and franchisees who are dependent on Windows systems, the attack highlights the significant risks and high costs associated with keeping cybersecurity... More
  • Five Tips for Negotiating Your First Office Lease Whether it is expanding into a new market or moving out of the proverbial garage, it is common for a startup company to sign a commercial lease agreement in its early stages. In negotiating the lease, the company’s legal counsel will rely heavily on the owner to advise on the “business terms” of the lease.  In fact, in many cases, the attorney is brought into the process after a letter of intent has been signed and the key business terms... More
  • Tesla “Franchisee” Thwarted in Utah Tesla, the electric vehicle automaker, recently lost a round in the Supreme Court of Utah. Tesla set up a wholly-owned subsidiary called “Tesla UT” that was to hold a license to sell Tesla’s cars to the public. The Utah Supreme Court, in a narrow but unanimous decision, held that the arrangement between Tesla and Tesla UT amounted to an illegal automobile franchise under Utah law. The case turned on a relatively straightforward point of Utah law. To wit, in Utah, automobile... More
  • Debit Card Swipe Fees Only Hurdle to Dodd-Frank Repeal? Respecting a issue of great importance to the franchise community, Bloomberg Law this morning is reporting that repealing a cap on debit card transaction fees is the only issue holding up an otherwise unified Republican bill to revamp and largely repeal the Dodd-Frank Act, the Financial CHOICE Act of 2017. Copyright: leaf / 123RF Stock Photo Chairman Jeb Hensarling (R-Texas) told Bloomberg that the cap on debit card transaction fees is the “single most contentious portion” of the repeal bill.  The cap,... More
  • Accidental Franchisor in Hot Water Safe Step Walk In Tub Co. (“Safe Step”) failed to take the requisite “safe steps” before potentially becoming an accidental franchisor. In Safe Step Walk In Tub Co. v. CKH Industries, Inc., Safe Step filed an action against a licensee, CKH Industries, Inc. (“CKH”) for breach of contract for non-payment of certain fees. CKH filed 22 counter-claims against Safe Step including violation of the Federal Trade Commission Rule on Franchising (“FTC Rule”) as well as the state franchise laws of... More
  • Enforcement is on the Menu: May 5, 2017 is the Deadline to Comply with Menu Labeling Rules Copyright: yarruta / 123RF Stock Photo Over two years ago, on December 1, 2014, the U.S. Food and Drug Administration (“FDA”) published a food labeling rule requiring “chain” restaurants and similar retail food establishments to list calorie information on menus and menu boards, including food on display and self-service food (the “Rule”). On May 5, 2017, the FDA will begin enforcing the Rule. Businesses covered by the Rule must be in compliance by May 5, 2017. The Rule implements the nutrition labeling provisions... More
  • Reverse Due Diligence – A Critical Analytical Tool for Emerging Tech Companies For investors and founders of emerging tech companies, leaving money on the table is a tragedy which can never be remedied once it occurs. An exit sale to or investment from a large strategic buyer is for many young tech companies a once-in-a-lifetime event with enormous economic consequences impacting both the company’s founders and investors. They must “get it right” with respect to the enterprise value of the emerging tech company. For reasons explained in a 2014 article by Fox Rothschild... More