Franchise Acquisition Lawyer in California

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Acquisition Stars advises buyers and sellers on franchise acquisition lawyer matters across California.

Serving 1 market across California.

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Franchise Acquisition Lawyer Practice in California

Acquisition Stars advises buyers and sellers on franchise acquisition lawyer matters across California. Alex Lubyansky leads every engagement, and has been M&A counsel since 2013 across transactions of varying complexity, from lower-middle-market deals to multi-party structures.

California Transaction Considerations

  • California's complete ban on non-competes (Business & Professions Code Sections 16600 and 16600.5) voids agreements regardless of where or when they were signed, overrides choice-of-law provisions applying another state's law to California employees, and gives workers a private right of action with one-way attorney fee shifting
  • The California Environmental Quality Act (CEQA) can delay transactions involving real property or businesses with significant environmental footprints
  • California gives the spouse who operates a community property business primary management and control under Cal. Fam. Code 1100, but that spouse must give the other spouse prior written notice before selling all or substantially all of the business personal property, and both spouses must join to sell community real property

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Franchise Acquisition Lawyer Service Areas in California

Acquisition Stars represents clients in each of the following markets. Click any city to learn about franchise acquisition law services in that area.

Los Angeles

Franchise Acquisition Lawyer in Los Angeles

California Legal Framework for Franchise Acquisition Law

Non-Compete Agreements

The seller's covenant and the franchisor's in-term and post-term covenants must both fit what the state will enforce.

Banned entirely. Limited exception for sale of a business.

Non-compete agreements are void and unenforceable under California Business and Professions Code Section 16600. This ban applies broadly, with narrow exceptions only for the sale of a business (the seller may be restricted from competing with the sold business), dissolution of a partnership, or dissolution of an LLC. Even with the sale-of-business exception, restrictions must be reasonable.

Tax Considerations

Sales tax on transferred equipment and inventory, plus successor liability, shape the resale price allocation.

California imposes an 8.84% corporate franchise tax on C-corporations and a 1.5% franchise tax on S-corporations. The state does not conform to federal qualified small business stock exclusions. Under California community property rules, the spouse who operates a business that is substantially all community personal property has primary management and control and must give the other spouse prior written notice of a sale of all or substantially all of the business personal property, and both spouses must join to sell or encumber community real property, under Cal. Fam. Code 1100. California sources income based on market-based sourcing rules, which can affect multi-state deal structures.

Filing Requirements

Franchise registration and relationship laws add a franchisor consent step and disclosure timing to the standard entity filings.

Mergers and asset acquisitions require filings with the California Secretary of State. The California Franchise Tax Board requires tax clearance certificates for dissolving entities. Bulk sales transactions require Notice to Creditors filings. Foreign entities must qualify with the Secretary of State before doing business in California.

Bulk Sales / Asset Purchases

If the transaction transfers assets, check whether creditor-notice or tax-clearance rules in the state affect the closing date.

California retains a modified Bulk Sales Act under California Commercial Code Sections 6101-6111, applicable primarily to businesses whose principal activity is the sale of inventory. Buyers must comply with notice requirements to the seller's creditors at least 12 business days before the bulk transfer. Failure to comply allows creditors to void the transfer.

The federal framework for a franchise resale

  • Buying an existing franchised location is not the same transaction as buying an independent business. The buyer is stepping into a relationship the franchisor controls, so the purchase depends on the franchisor's consent to the transfer, not only on agreement between the buyer and the seller. The franchise agreement, not the purchase agreement, usually sets the conditions the transfer has to satisfy.
  • Whether the buyer has a federal right to current disclosure depends on the franchisor's role and any exemption. Where the franchisor signs the incoming owner to its current agreement with significant involvement, the rule can reach the transaction; where the buyer only takes assignment and the franchisor merely consents, it may not. The remaining term, and whether renewal survives the transfer, changes what the buyer pays for.
  • Franchisors commonly charge a transfer fee and require a general release from the seller as conditions of consent, protecting the franchisor from claims tied to the outgoing owner's tenure. A buyer's counsel reviews the transfer conditions in the franchise agreement early, because a franchisor's refusal to consent, or a demand the seller cannot meet, can stall or kill a deal that both sides have already priced.

Advance disclosure depends on the deal shape

For a franchise sale that is not exempt, the FTC Franchise Rule requires furnishing the current disclosure document at least 14 calendar days before the franchisee signs a binding agreement with, or makes any payment to, the franchisor or an affiliate, under 16 CFR 436.2(a). A payment to the selling franchisee, or a signed purchase agreement with the seller, does not by itself start that period. Two definitions can exclude a resale: a transfer by an existing franchisee is not a sale where the franchisor had no significant involvement with the buyer, and approval or disapproval alone is not significant involvement, under 16 CFR 436.1(t); a franchisee selling only its own outlet is not a franchise seller, under 16 CFR 436.1(j). Exemptions in 16 CFR 436.8 can also apply. Confirm which path applies before assuming a federal 14-day review right.

Sources: 16 CFR 436.2(a), 16 CFR 436.1(t), 16 CFR 436.1(j), 16 CFR 436.5, 16 CFR 436.8

Diligence focus for a franchise resale

  • Remaining term on the franchise agreement and renewal eligibility
  • Franchisor's consent conditions and any transfer fee
  • Training requirements the incoming owner must complete before opening
  • Scope of the general release the franchisor is requiring
  • Whether the current form of agreement differs from the seller's

Other M&A and Securities Services in California

Acquisition Stars handles M&A transactions for California clients and works with securities counsel on securities matters. Alex Lubyansky leads every M&A engagement.

Business Acquisition Lawyer in California SBA Acquisition Attorney in California Purchase Agreement Attorney in California LOI Attorney in California

Ready to Discuss Your California Deal?

Alex Lubyansky leads every franchise acquisition law engagement, with an associate supporting the work.

M&A counsel since 2013. Nationwide practice. LOI through closing.

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We review every transaction inquiry within one business day.

Your information is kept strictly confidential and will never be shared. Privacy Policy