I am currently working on pulling together the final tax return. The owner has thrown in the towel. Yet he still has time on his original contract with the Franchisor.
My client stopped making the required monthly payments a few months ago and has received a form letter stating that he needs to cease and desist from using the Franchise name or any of their materials.
The client came to me already in the midst of the Franchise. When I found out the details or the agreement, I had a million questions. The most important being what value did the Franchisor bring to the table the exorbitant royalty fee they charged. Very little it turned out.
My client knows the risk he is taking; the Franchisor can come after him. But they are also bogged down in all sorts of lawsuits and filing with the SEC. There apparently have been all sorts of shenanigans going on- some real and some apparently imagined. But the parent company has been under an SEC microscope for quite a while.
This is why my client feels that they may not be coming after him or the others who threw up their hands and shuttered their businesses. As an outsider looking in I did not see the value given for the initial fees and the monthly royalties. There were no bulk discounts or start-up help. It was listed a turnkey operation that apparently need a lot of hand holding to get this behemoth off the ground.
To me the risk is not worth the reward.