October 30, 2012

John Kujawa E-mail on McDonald's Bankruptcies

He's right there are not many bankruptcies in McDonald's but that's more about the 
way the franchise agreement is written than anything to do with financial solvency.

We don't give legal advice here but we have talked to more than a few McDonald's 
Operators who made the decision to file for bankruptcy. We can report that nearly 
every one of those Operators (former Operators) found it to be a huge mistake.

Based on these discussions we can make a few basic recommendations. If you or any 
McDonald's Operator you know is considering this as a strategy:

* Read and re-read your franchise agreement.

* Reread your franchise disclosures.

* Obtain multiple legal opinions from multiple sources.

* Explore ALL other options with your advisers.

* Do not expect to have any control or influence over the court or the process.

* Do not expect to embarrass McDonald's Corporation.


Anonymous said...

Dick, given your experiences in franchising and as Operator can you give your opinion on why an Operator would choose such a strategy?

Richard Adams said...

IMHO it can only be the result of bad advice.

Anonymous said...

Thanks. If possible, can you elaborate on the first statement regarding how the agreement is written in relation to solvency.

Richard Adams said...

With all due respect this part of the agreement should not take much explaining. I find that too many franchisees have not bothered to read or understand their franchise agreements. Of course that also applies to the people on the corporate side.

A suggestion - make a copy of your most recent franchise agreement. Sit down with a highlighter and mark up anything you don't completely understand.

Then take the agreement to an attorney and discuss the highlights.

Any franchisee who doesn't understand their agreements is destined to be a victim of the franchisor for the entire term of the franchise.