(12) Should the process of reviewing franchise agreements be streamlined and/or simplified and, if so, how? Lenders must continue to receive (i) copies of the franchise agreement, (ii) the SBA addition to the franchise agreement or a Negotiated Addendum and Certification SBA and (iii) all other franchise documents to be executed by the franchise, and these fully executed documents must be obtained prior to payment. While lenders can be assured that the franchisor and franchisee are not affiliated if lenders follow and request all SBA guidelines, lenders must continue to audit agreements to ensure that all other requirements of the SBA loan program are met, such as eligibility. B, credit concerns and guarantee issues. 2. Where an applicant for a small business loan has or has a franchise, licensing, distributor, jobber or similar relationship relationship and such a relationship (or product, service or trademark under that relationship) is essential to the applicant`s business, SBA requires a review of the agreement and all related documents that govern the relationship (or product, service or brand). Are the relationships that need to be revised to this standard sufficiently clear? As part of the current SBA procedure (more detailed in Section V below), this review is conducted by SBA for certain credit applications and by participating lenders or certified development companies (CCP) for other credit applications. The SBA reviews applications submitted as part of the „unsignified“ processing of lenders participating in the SBA (7) lender`s (a) commercial credit program and CPCs in the SBA`s development business development program (also known as the 504 loan program). For 7 (a) loan applications processed under the delegated jurisdiction of a lender 7 (a) are taken over by lender 7a to carry out the check. However, the SBA also provides these lenders with the opportunity to submit the corresponding documents to the SBA for verification and to determine whether the parties are affiliated with the agreement. The Agency considered that an independent entity should retain the ability to set its own prices, allowing it to make a profit or risk a loss of its own shares. Some franchise agreements now contain a language that gives the franchisor the ability to set both minimum and maximum prices that a franchisee can charge for its products or services. In some franchise agreements, the language is very broad, with no specific parameters or restrictions on the franchisor`s ability to set prices (as opposed, for example, to a specific advertising program or to certain well-established national or regional accounts programs).
The Agency found that franchisors capable of setting price-setting ranges to control national account types or national promotions are not linked to their franchisees until the pricing model is applied in a manner that would target a particular franchisee or site. The SBA asks for comment on whether this issue is an appropriate indicator of a company`s independence and under what circumstances. Similarly, franchise agreements requiring the franchisee to be held liable for the actions of the purchaser (continued liability) after the transfer were also defined by the SBA as excessive control. Once a franchisor consents to the transfer and accepts the purchaser, a truly independent franchisee should not be held responsible for the actions of the new owner for small businesses. Non-competition clauses and other provisions that could lead to a franchisee being held liable for their own actions after the transfer were found acceptable by the SBA (i.e., there is no excessive control). If you have questions about the SBA franchise rules or would like to be helped verify agreements that might fit the FTC definition of a franchise, please contact your SBA® legal department at Anastasi Jellum, P.A.