Tag Archives: Federal Trade Commission (FTC)

Improving Franchise Laws

Will California’s recent overhaul of its franchise relationship law lead to a proliferation of state franchise relationship laws? I doubt it. As I’ve written elsewhere, my guess is that the California law represents a specific congruence of interests that is unlikely to be repeated in other states. Outside of California, the new franchise laws being enacted today have nothing to do with termination and non-renewal or good faith in franchise relationships. Instead, we are seeing new state laws declaring that franchisors are not joint employers of the franchisee’s employees. Such laws were passed in recent months in Texas (S.B. 652), Louisiana …

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What’s an FPR?

Every franchise buyer wants to know how much money he or she can make from the franchised business.  Franchise sellers naturally want to answer that question in order to make the sale.  But many say that they cannot give figures to prospective franchisees, and they suggest that the prospects talk to other franchisees whose contact information is typically listed in an exhibit to the franchise disclosure document (FDD). The fact is that franchise sellers may indeed provide information regarding earnings, but only if the franchisor discloses “financial performance representations” (or FPRs) in Item 19 of the FDD.  If no FPRs appear …

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State Regulation of Biz Ops

26 states in the U.S. have laws that govern the sale of business opportunities, or “biz ops”. California and some other states use the term “seller assisted marketing plan” instead of business opportunity, but the substance is the same. At the federal level, the Federal Trade Commission (FTC) regulates the sale of biz ops, as explained in an earlier post. The FTC biz op rule does not preempt the state biz op laws, but allows the states to impose their own requirements. Like the franchise laws, the business opportunity laws contain disclosure requirements and many require a filing. Unlike in franchising, …

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What’s a Biz Op?

What’s a business opportunity or, as we often say, a “biz op”? The Federal Trade Commission (FTC) regulates biz op sales under its authority to regulate unfair or deceptive trade practices. The FTC’s definition of a business opportunity differs from the definitions under the laws of the 26 states that regulate biz ops, and the states themselves have varying definitions. These laws impose anti-fraud obligations on the sellers of biz ops, and some require registration and disclosure. This post covers the FTC biz op rule (16 CFR Part 437). A separate post will address state biz op laws. The FTC …

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What’s an Exclusive Territory?

The extent of a franchisee’s territorial rights is the subject of Item 12 of the franchise disclosure document (FDD). One of the questions franchisors must address in Item 12 is whether the territory is exclusive. If the territory is not exclusive, the Federal Trade Commission’s trade regulation rule on franchising (the FTC Rule) requires that Item 12 contain this statement: You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. So what does “exclusive territory” mean?

Franchise Law Change in New York

My optimistic world view got the best of me at the start of the 2014 legislative season in New York State.  I thought that 2014 might be the year when New York State changes its franchise law.  The changes that the New York State Bar Association (NYSBA) first recommended in January 2010 did become an Assembly bill at the end of the 2014 legislative session.  But no Senator wrote a companion bill in the 2014 legislative session.  And no bill came to a vote either in the Assembly or the Senate. The New York Franchise Act (NYFA) was already out of step with …

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Welcome to Franchise Alchemy

Welcome to Franchise Alchemy, a blog that magically transforms franchise business and law news into golden concepts.  Of course, we make no promises about the gold or the magic.  But we’ll do our best. We are lawyers at the national law firm of LeClairRyan.  We hope to make real contributions to the conversation with franchisors, franchisees and franchise consultants, and with legislators, judges, franchise law administrators and individuals and businesses considering franchising.  In sum, our audience is comprised of people in the franchise business and those who deal with franchise companies or simply have an interest in the subject. Why …

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