Tag Archives: New York

Testing a New Franchise Concept

One of the toughest challenges an aspiring franchisor may face is selling its first franchise.  Who would take the risk of buying a franchise from a franchise company that has no franchisees? For a few successful business owners, the idea of franchising may come from one or more customers who love the business concept and initiate the idea of buying a franchise even before the owner has taken the first step to prepare a franchise offering.  But this rarely happens. Here’s another suggestion:  If the aspiring franchisor has a successful business unit (a store or a restaurant, for example) that …

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Correcting an Accidental Franchisor Violation

What’s a franchise?  Franchise registration and disclosure laws define a “franchise” more broadly than people generally realize.  A company may be franchising without knowing it.  The “license” agreement may have been drafted, for example, by an attorney who has limited knowledge about franchise law.  Hence the popular topic (at least among franchise lawyers) of the “inadvertent” or “accidental” franchisor. A business owner who has run a successful “test” of licensing its business may decide that the next step is to set up a franchise system, not realizing that the test was already a franchise sold in violation of one or …

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Suspending Franchise Sales

In several states that require franchise registration, franchisors should suspend franchise sales while an amendment or renewal application is pending with the state.  Franchisors commonly suspend franchise sales pending registration in most states that require franchise registration.  But California and New York each offers a unique and very different approach than a blackout or suspension of sales. California takes an approach that is eminently practical.  In California, a franchisor may deliver to a prospect the franchise disclosure document (“FDD”) as filed with state for renewal or amendment together with a written statement that the filing has been made but it has not …

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Reflections on the Origins of the NY Franchise Act

I recently had occasion to review the legislative history of the New York Franchise Sales Act (NYFSA)–click here to see for yourself. Here are a few of my reflections. The NYFSA was enacted into law in 1980 and became effective January 1, 1981. At that time, Robert Abrams was the NY Attorney General and Hugh Carey was the Governor. Abrams supported the bill and Carey signed it into law. In recommending passage of the bill, Attorney General Abrams cited the numerous complaints of franchise fraud and abuse that the department of law had received. More than 13,000 New Yorkers had …

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Why Locate Your Business in New York?

New York is a great place to live and do business. The state is running an active marketing campaign to let the world know and to attract new business to the state. But while on the one hand New York is looking to bring new businesses to the state, on the other hand New York’s laws push businesses away. The New York franchise law is just one example, as discussed in an earlier blog post. This post is about the laws that make the largest owners of a New York closely held corporation personally liable for employee wages. I wrote …

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Franchisees Are Not “Large Employers”

The City of Seattle, Washington, approved a $15 minimum wage law June 2, 2014, the highest minimum wage law in the U.S.  Hourly workers deserve reasonable pay.  And if there is no movement on a change in the federal rate, then I understand the desire of workers and unions to push for higher wages at the local level. But Seattle did go too far in one disturbing respect. The new law views franchisees as large employers simply because they are part of a franchise system. This means that an individual franchisee with a small number of employees may be required to …

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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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