New York Franchise Capitalization Requirements (Part B)

Undercapitalization and Alternatives for Your Franchise in New York

If your franchise in New York does not meet the necessary franchise capitalization requirements, you may be able to negotiate a solution. In this case, there are several solutions a New York franchise attorney may present to you.

These include:

• a capital infusion;
• a guarantee of performance; and
• a deferral of initial fees.

Capital Infusion in New York

Obviously, a capital infusion is one solution to meet the New York franchise capitalization requirements. This does not refer to short-term borrowings that are repayable within 12 months, but long-term borrowings that may provide adequate capital. This loan may even be from an officer or stakeholder. If you're considering a capital infusion, you may want to talk with a New York franchise attorney about the long-term responsibility this will mean for your franchise in New York.

Guarantee of Performance in New York

If a New York franchisor is undercapitalized, an affiliate may offer a guarantee of its performance of franchise agreement obligations. This may be accepted only if the guarantor has audited financial statements that are filed with the registration application. Furthermore, this guarantee must be included with the disclosure document that is provided to prospective franchisees.

The guarantee of performance will not be limited to the franchisor's performance of pre-opening obligations. Instead, the guarantee will extend to the franchisor's performance throughout the term of the franchise agreement, as long as the guarantee is in effect.

Deferral of Initial Fees in New York

Sometimes the state will approve a New York franchisor if they agree to modify their franchise agreement so that no money is payable to the franchisor until after the franchise opens. This will ensure that the New York franchisor cannot use the initial franchise fees to fund its business operations before it discharges any pre-opening duties that are owed to the franchisee.

In addition to these solutions for meeting the New York franchise capitalization requirements, there are other solutions that may be more suitable for you. For information on available solutions, you can consult a New York franchise attorney. An experienced New York franchise attorney can advise you on the capitalization process and the long-term effects each solution may have on your franchise in New York.

Contacting a New York Franchise Attorney

If you are an entrepreneur who is interested in franchising your business there is a lot you need to know, including the significance of evaluating your trademark and how to approach the preparation of your Franchise Disclosure Documents. For a limited time, get New York franchise attorney Charles N. Internicola's franchise law report to determine whether your business is right for franchising. Contact us today at 800-976-4904 for more information about Mr. Internicola's franchise law services in New York and how he assists entrepreneurs franchise their business nationwide.

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