Pieces of the M&A Puzzle: Key Transaction Challenges for the Franchise Lawyer

Franchise counsel representing clients involved in merger and acquisition activities must consider a host of issues to successfully assist in the orchestration of a transaction.1 This article covers four distinct but fundamental franchise-specific issues that counsel will invariably encounter whether representing a prospective purchaser or seller in a franchise merger or acquisition transaction: (1) disclosing a proposed transaction to existing and prospective franchisees, (2) curing franchisespecific violations at or around the time of a franchise merger or acquisition transaction, (3) providing legal opinions in connection with a franchise merger or acquisition, and (4) structuring a seller's and purchaser's successor rights and liability for the seller's obligations or omissions following a franchise merger or acquisition. Materiality is defined broadly under the Federal Trade Commission's (FTC's) former (1979) Franchise Rule2 as including "any fact, circumstance, or set of conditions which has a substantial likelihood of influencing a reasonable franchisee or prospective franchisee in the making of a significant decision relating to a named franchised business or which has any significant financial impact on a franchisee or prospective franchisee."' We note that in enacting the amended Franchise Rule in 2007, the FTC intentionally omitted a definition of materiality.