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Log In / Register | Nov 18, 2017

SBA New Rule Gives Relief to Franchise Sector

The SBA's new rule, effective January 1, 2017, offers encouraging relief to franchise owners and franchisors from the red tape of its lending programs. The 343-page document, which includes yellow highlights, is available online, but fortunately franchise attorney Theodore P. Pearce has written a summary:

For the franchise community, the SBA’s new Standard Operating Procedure is a welcome change from a Byzantine compliance process in which lenders, franchisees, and franchisors had to undergo a painstaking review of the franchise disclosure document (FDD) and its many exhibits to discern whether any of the control factors in those documents rose to the level of affiliation.

…The new Standard Operating Procedure addresses four key provisions typically included in a franchise agreement that the SBA deems to show an affiliation. Each of these four provisions in the new addendum will supersede any conflicting provisions in the franchise agreement: — Theodore P. Pearce, Bradley Arant Boult Cummings LLP, Lexology

The four provisions, which Pearce lists and describes, are: 1) transfers of ownership of a franchisee, 2) forced sales of assets, 3) real estate covenants and 4) control of franchisees’ employees.

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