Amidst the continuing pandemic, summer brings faint hope that someday things might return to business as usual. For the franchise industry, recent events offer a hint of normality. In Part 1 of this early summer round-up, we take a look at the actions taken by Congress to legislate some flexibility into Payroll Protection Plan loans
The 90 day Franchise Bankruptcy Solution
The CARES Act has amended the Bankruptcy Code to provide an expedited and easier version of a business bankruptcy proceeding. We now have “Subchapter 5” for small business and individual debtors. This process fulfills a sweet spot for small franchisors and franchisees. It anticipates a Chapter 11 type result, without the administrative headaches and expense,
Indiana Franchise Compliance Alert: Changes Ahead
Indiana issued a compliance alert covering four updates to the Indiana franchise laws to take effect on July 1, 2020. The changes (i) add a duty to update FDD within 30 days of a material change (ii) grant the ability to select specific annual registration termination dates, (iii) clarify the exemption coverage; and (iv) clarify
ACT NOW!!! New PPP and EIDL funds will disappear FAST
Yesterday, legislation adding an additional $310 Billion to the Payroll Protection Program (PPP) and $50 Billion to the Economic Injury Disaster Loan (EIDL) funds passed the Senate, and passage in the House is imminent. But the new funds will disappear quickly!
The original massive PPP and EIDL appropriations evaporated in less than two weeks. Although
A Rough Roll-Out for Payroll Protection Loans
Need and speed can be a dangerous combination. Just ask Peter “Maverick” Mitchell. That’s a lesson that lenders and borrowers are discovering with CARES Act Payroll Protection Program (PPP) loans. The CARES Act’s PPP provisions promise accessible liquidity support for franchises and small businesses. Indeed, Treasury Secretary Mnuchin said PPP or Emergency Income
(Some) Good News: SBA Guidance Mostly Exempts Franchises from Affiliation Rules for Paycheck Protection Act Loans
On April 3, 2020, banks commenced taking applications for the Small Business Administration’s (“SBA”), Paycheck Protection Program (the “PPP”) loans, as provided in the Coronavirus Aid, Relief, and Economic Security Act aka the CARES Act. At the highest level, the PPP allows eligible businesses to borrow up to 2.5x average monthly payroll costs
CARES ACT – A LIQUIDITY LIFELINE (With tough choices for franchising)
Let’s face it—COVID-19 has decimated the franchise industry, along with the rest of the economy. The food service, hospitality, travel and the service sectors had very tough decisions to make almost instantly, with very little guidance. Questions persist: Can or should franchise businesses continue to operate? How can workers be protected? How can business be supported and bills paid? How long will it last, and how quickly can the industry get back on its feet?
We still don’t know the answer to the last two questions. But the Coronavirus Aid, Relief and Economic Security (CARES) Act, signed on March 27, 2020 should help staunch the financial bleeding. CARES offers franchise businesses a liquidity lifeline in the form of loans (which can become grants), deferred payments, and tax relief. CARES is targeted to small businesses (fewer than 500 employees) but in a coup for franchising, franchises, specifically “any organization operating as a franchise that is assigned a franchise identifier code by the SBA,” are exempted from the size eligibility requirements. This is especially significant for multi-unit franchisees, whose multiple locations when combined would have exceeded the 500 employee limit. In an earlier parallel move, Congress enacted the Families First Coronavirus Response Act (FFRCA) to protect liquidity for individuals and families. The overarching intent of these massive spending bills, unprecedented in our nation’s history, is to help businesses and individuals weather the challenge of COVID-19. Neither law is intended to be a stimulus.
CARES poses tough choices to businesses that are already in shock, the result of an abrupt closure or dramatic sudden catastrophic decline in income. Should employees be laid off or retained? Is it better to off-load employee expense, normally a business’ greatest expense, or keep them employed and bear the potential burden of the increased sick pay and family medical leave payments mandated by FFRCA? If a business opts to maintain employees, will it be able to survive financially? If employees are laid off, how quickly will they return to the workplace in light of the greatly expanded and very generous unemployment benefits mandated by CARES? When the virus struck, the workforce was fully employed; there was no excess of workers. Thus, workers who are financially dissuaded from returning to work when the virus emergency ends may dampen or delay the economic recovery that is the goal of CARES.
Continue Reading CARES ACT – A LIQUIDITY LIFELINE (With tough choices for franchising)
The CARES Act and Small Business Administration Loans
There’s a big insurance company that uses the tag line: Life Comes at You Fast. I sure feel that life is coming at me very fast in this Brave New World of COVID-19. Congress seems to agree, as it worked in record time to enact the $2 Trillion Coronavirus Aid, Relief and Economic Security or
CARES Act: An Initial Review
As the effects of the COVID-19 outbreak evolve, we here at Fox Rothschild continue to update our Coronavirus Resource Center. Today, we’ve been hard at work reviewing the historic CARES Act and its over 800 pages of provisions.
Learn what’s contained in the $2.2 trillion CARES Act stimulus package and how it will affect
You’re Worried? What To Do. NOW.
A recession is coming, if it is not already here. But this won’t be a recession like 2008. Back then, the banks threw you under the bus so that they could survive. Today, they are stronger. More importantly, they know they must partner with you. So your strategy must be different now.
Bottom line? Flexibility