New business by combining stakeholders

[Sconhome]

A new retail store is being considered as a joint venture in an almost franchise format. Let me outline. .

A number of investors are opening a new retail business. An existing business (in a different location) is considering an equity and goodwill stake in the new store. This would be mutually beneficial as the investors gain by piggy backing the reputation of an existing business and the existing business gains by expanding, indirectly, into new territory and extra discount from suppliers etc.

Can anyone suggest a good format for establishing this setup?

At the moment it is being considered that a number of companies are formed. ABC ltd by the investors, the existing company DEF Ltd trading as Retail Store and then a joint company formed by both to represent the new business GHI Ltd which would then trade as Retail Store also.

Doing this is a bit onerous but may be the best way to represent the individuals stakes and to draw clear lines in the business setup.

Any guidance would be welcomed.

 

[Brendan Burgess]

Seems very complicated.

If the new venture doesn't work, then the existing company might feel obliged to meet their debts.

Will the new company have a right to use the name of the existing company forever.

it would be much simpler to do up a franchise agreement and maybe a joint purchase agreement.

Whatever you do, make sure you have an agreement whereby you can exit the arrangement easily.

Brendan

 

[Sconhome]

Thanks Brendan,

I suppose the exit of any of the stakeholders is what is being considered. If the original shop stake (DEF Ltd) exits then the name is their tradename. The shop would in this case be renamed as formerly - Retail Store, under new management etc, that kind of format through the company ABC Ltd.

The route of franchise will have to be looked at.