Imagine a client walks into your office wanting to get out of a contractual arrangement that they entered into three years ago. They explain that they are losing money, and that the contract makes no sense for them any longer.

In probing them, and reading the contract, you learn your client’s business is essentially controlled by the other party. The contract dictates the most basic aspects of the business—the hours of operation and the training requirements of the employees. It gives the other party approval rights over who the manager will be; the layout and appearance of the location; and controls what products and services your client can sell. Digging further you find that your client had to buy all of the original FF&E from the other party, and once open, is required to continue buying all inventory from the other party and its wholly owned affiliates, all at prices that are above what your client could get on the street for the exact same products. And, beyond controlling the price of goods (by being the only seller of those goods your client is allowed to purchase from), the contract also allows the other party to control the retail price of the goods and services your client may offer as well. In sum, your client has little to no control of their own profit margin.

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