Franchise Lawyer Blog

Wednesday's Wall Street Journal article, "Dining Chains Shut Doors" by Jeffrey McCracken and Janet Adamy, discusses the Chapter 7 bankruptcy liquidation filing of Plano, Texas-based Metromedia Restaurant Group, the parent company of Bennigan's and Steak and Ale. Although the 138 franchisee-owned Bennigan's sites were not included in the filing and apparently intend to remain open, they will be doing so initially without a franchisor or franchise system support. Those franchisees will also be trying to succeed in an environment that has already proven to be glutted with mid-priced, sitdown restaurants. The Ground Round chain went through a similar experience several years ago; ultimately the franchisor was acquired by a cooperative of existing franchisees.

What the future holds in store for Bennigan's cannot be known at this point, but the bankruptcy is a painful indication of the Darwinian survival process that is evolving in the fiercely competitive franchise restaurant landscape. That does not mean that all franchised restaurants are a bad bet in this environment. Only time will tell if the economy is driving a broad move away from eating out, or simply to restaurants that offer cheaper, fast food meals. The latter concept could bode well for the franchisors of those concepts. We will examine how the more nimble franchisors are adjusting to the environment and look at some of those concepts in coming posts.

Welcome to Franchise Lawyer Blog, published regularly by Einbinder & Dunn LLP, a New York City law firm with a broad based commercial practice and a finely tuned expertise in franchise law. Our firm has attained a unique perspective over the years as a small firm that routinely deals with the largest firms and as a franchise firm that deals regularly with both franchisees and franchisors. We'd like to share that cutting edge expertise with you on a regular basis.

Every day the attorneys in this office wrestle with issues of first impression raised by the new FTC disclosure requirements that became mandatory just this month, as well as creating and improving the new form Franchise Disclosure Document (FDD). We are also addressing in both negotiation and litigation classic franchise questions such as when does a business become a franchise despite the parties' desperate attempts to call it something else? All the while we are aiding clients in developing franchise systems and acquiring established franchises.

We will share our own experiences as well as national developments with you and hopefully add to your understanding of this rapidly developing area of the law. Many people believe that the franchising current flows counter to that of the mainstream economy, as downsized individuals look to buy a job in established small businesses. That theory may be sorely tested as our economy continues to turn downward.

Stop by and visit with us here and you will leave more informed about franchising and, by extension, about the overall nature and condition of our economy.