W. Michael Garner presented the franchisee point of view on franchisor mergers and acquisitions at the International Franchise Association’s Legal Symposium in May of this year.
Pointing out that numerous franchisors recently have been acquired by private equity firms, he cautioned franchisees that the strategy of these firms is often to “strip and flip” them–meaning that the company will change franchise agreements to increase fees, decrease services, and increase the burden on franchisees in order to fatten profits. Once this is done, the private equity firm will seek to “flip” the company by selling it to a new buyer.
Michael discussed several strategies for dealing with acquisitions and mergers, including the formation of franchise associations, claims that franchisees can bring against franchisors and their owners, and injunctive relief to stop acquisitions.
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