For those with a successful business, franchising can be a good way to expand quickly and perhaps stay ahead of the competition.

After all, franchising brings little risk to the franchisor as the franchisee is the one putting up his or her capital when opening a new unit.

What is a franchise?

Franchising is the selling of a particular business model and method.

“The franchisee will pay an upfront fee for the right to use a name and/or trademark to open a business and to receive the proper training,” said Anthony Spotora, a Los Angeles-based business lawyer. “Often, the franchisee will also pay an ongoing percentage of sales to maintain its rights and keep receiving assistance in various areas such as advertising, marketing and operational management.”

Franchising a business has many pros, but it is important to undertake such an endeavor only after careful thought. Business owners put their hearts and souls into their businesses and often believe wholeheartedly in what they are offering to the public, but the reality is that the franchise model is simply not right for every business.

Things to Consider Before Taking the Plunge:

-Can this concept or product survive in other markets? What is a success in one region may be a failure in another. While the franchisee is the one taking the financial risk, poor performance can obviously have a negative impact on a name or brand.

-Will others want to buy this concept? Can others see the value in this particular model and method of doing business?

-Is there a manual of operation? Investors need to see that there is a method for running the business and an explanation of how they will receive training in the opening and operation of the business.

-Is there a prototype or a proven record of performance? Investors are more likely to believe in a concept or product that has a track record of success rather than one that has yet to get off the ground.

“Franchising is regulated by state and federal law. It is important to stay abreast of those rules and regulations. Those who do not follow them could end up seeing large fines or felony convictions,” Spotora said.

For those thinking about franchising a business, it is important to speak with an experienced business attorney.

To learn more, visit https://www.spotoralaw.com/.

When one successful company merges with or acquires another successful company, the deal attracts a lot of attention, particularly when the players are big names in high-profile industries. The growth potential of each entity can be enormous.

But what can also be profitable are strategic “carve-outs,” which occur when assets are “scooped out” of an ailing company. You may be able to purchase just the piece of the company that you are interested in, or you may be able to buy the entire company and then sell off the assets that you don’t care to keep.

There is more inherent risk with carve-outs because you are dealing with something that is currently troubled financially. The flipside is that these assets often come at a reduced price.

When looking to purchase a carve-out, it is imperative to look at every piece of the company’s financial puzzle and be sure the asset can be turned around successfully. Thorough analysis is paramount.

Some of the questions you want to ask yourself:

-From the ground up, what problems did the asset or company face?

-What does the expense structure look like?

-How long will it take to make the necessary adjustments for the company or asset to become profitable?

-Is the risk worth the potential reward?

Just because an entire company or asset is not performing well doesn’t mean it is worthless. Perhaps the asset simply needs a shift in its business strategy or a minor restructuring of its finances to put it in the black.

When looking for a carve-out, the best bets are within industries that you have experience with or carry the potential for “synergy” with your current business. This can save a lot of money and make the deal more profitable in the end. For example, if you manufacture household goods, you would do best to purchase a product that can be easily integrated into your current operation. Because you are purchasing a troubled asset, it makes little sense to take more risks than necessary.

While companies seeking carve-outs usually look to their local competition, sometimes it makes sense to go beyond your own borders, too, particularly in today’s challenging economic climate. To stay competitive and to diversify in tough times, it may make sense to expand to a global market. Of course, that carries with it a whole host of added legal requirements.

If you are a company looking to “carve-out” a competitor’s assets, it is important to speak with an experienced attorney.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.