Two Franchise Owners Form a New Company Case Study

Creating a winning tax strategy for both buyers and sellers.

Smith Schafer Approach

When two Worldwide Express franchise owners decided to join forces and form a new company, Fusion Logistics, they had BPK&Z, now known as Smith Schafer, in place to help. As the CPA firm for one of the owners already, they felt Smith Schafer knew the industry and was the firm to take the company to the next level. The goal was to create a strategy to position their domestic and international shipping and freight company for numerous acquisitions and rapid growth.

John Edson, working with the owners in 2007, structured the new organization and any new acquisitions they would be making to minimize their tax impact and the sellers’ tax impact. Once the strategy was in place, their next goal was to acquire six more franchises and expand their business. The deals had to be structured to be attractive to the seller by minimizing their tax liability when they sold their franchise. By structuring the deals, so the sellers had an ownership interest in Fusion, they could defer the taxes on the ownership interest they received until they sold their interest in the future. Since each of the existing franchisees now had an ownership interest in the new company, no assets had to be sold, and they could transfer their franchise agreement into Fusion on a tax-free basis. This sort of structure made it much more appealing to the sellers, and all six acquisitions took place in rapid succession.


The company continues to grow, and since the initial acquisitions, they have gone on to acquire four more franchises – and they expect the acquisitions to continue. In 2010 they experienced a 50 percent growth in revenue, and 2011 was on track to see a 35 to 40 percent growth.

Steve Baklund, CFO of Fusion Logistics, said of their work with John Edson, “Early on, he helped with the company’s formation. Now we rely heavily on them for tax advice. We have multiple-state issues and federal issues because we’re an LLC.”

Since the acquisitions, Smith Schafer has worked with Fusion to determine how cash distributions to the ownership group will be made. Balancing cash distributions with taxable income is discussed often. Steve commented, “John understands the resale model well. More importantly, he understands taxes around LLCs and how it impacts the shareholders.”

The future looks bright for Fusion Logistics, and with growth rates nearly unheard of in the current economy, it is clear the strategy set forth by the owners and Smith Schafer is working to support that strategy.