VINSON FRANCHISE LAW FIRM

The deadline for most US franchisors (those with December 31 fiscal year ends) has recently passed.  Under the FTC Franchise Rule (and similar laws in the states with franchise disclosure laws), each franchisor must update its FDD within 120 days after the end of each fiscal year end.  There are no exceptions.

If your 2012 FDD is not ready, then you must suspend all offers and sales of franchises ("go dark") until your 2012 FDD is ready.

If you disclosed to any franchisee prospect using your 2011 FDD before April 29, 2012, but the prospect has not signed the franchise agreement yet, then the recommended practice is to wait until the 2012 FDD is ready, then re-disclose and wait the applicable cooling off period(s) before signing a franchise agreement and accepting any money for the sale of a franchise.  Otherwise, you risk a claim in the future for failing to disclose material changes since the 2011 FDD.

A recent poster on LinkedIn asked about information on franchise law.  Here is a copy of my response:

There are many, many different sources of information on franchise law.

1.  For an overview, you might be interested in some of the consumer information on the Federal Trade Commission's web site. www.ftc.gov  At that site, you can also access the FTC Franchise Rule, the Statement of Basis and Purpose, the FTC Compliance Guide and FAQs for a detailed look at the federal regulations (and interpretive materials) affecting franchising in the US.

2.  The web site of the North American Securities Administrators Association (of which the franchise registration states are members) includes a wealth of information about state franchise laws.  http://www.nasaa.org/industry-resources/corporation-finance/franchise-resources/

3.  If you are interested in the franchise laws of any particular state, most state franchise regulatory agencies have information available on their web sites.

4.  Many franchise lawyers (including me) provide educational information on their web sites.

5.  There have been quite a few books published that include sections on franchise law, ranging from rather broad treatment in "Franchising for Dummies" to in-depth analysis and case citations in most of the publications of the American Bar Association's Forum on Franchising.

6.  The International Franchise Association's web site at www.franchise.org has some information about franchise law.

There are various types of laws affecting franchising, including:

n  pre-sale disclosure requirements,

n  pre-sale registration requirements,

n  on-going relationship issues between franchisor and franchisee (such as encroachment, discrimination, franchise buy-backs, use of designated suppliers, price setting, etc.), and

n  end-of-relationship issues (such as termination, non-renewal, transfers, right of first refusal, etc.).

Franchise law other than pre-sale registration and disclosure is usually governed by case law, and is often harder to locate.

The 2012 International Franchise Expo (IFE) is moving to New York after being held in Washington DC for more than 20 years.  It will occur on June 15 - 17, 2012.  This is the largest franchise expo in the United States.  The web site is: http://www.ifeinfo.com/index.cfm.

In honor of the occasion, New York has provided for a new exemption from the normal franchise registration requirement that is available to unregistered franchisors who will exhibit at the 2012 IFE and who qualify for the exemption.

KEY POINTS:

1. The exemption is not self-executing -- an application must be submitted in order to request the exemption.
2. It is possible that not all requests will be granted.
3. The exemption is available to US-based franchisors and foreign franchisors -- even foreign franchisors who do not have a Franchise Disclosure Document (FDD).
4. The exemption does not permit the exhibitor to: (a) sell any franchises in New York; (b) sell any franchises at the IFE: or (c) distribute any FDDs at the IFE.
5. A standard notice must be displayed at the exhibitor's booth.

In order to qualify for the exemption, exhibitors must submit to the New York Office of Attorney General the following:

• Copy of all promotional materials to be used at the IFE
• Filing fee of $150 per day of exhibition

The required forms and detailed instructions for requesting the exemption are available online at the New York's Office of Attorney General's web page for the Investor Protection Bureau:
http://www.ag.ny.gov/bureaus/investor_protection/franchisors_franchises.html.

Vinson Franchise Law Firm is pleased to announce the launch of its new and improved web site.  Watch this space for blog posts on current issues in franchise law.  Follow us or find us on Facebook, Twitter, Linked-in and other sites, using the buttons on our Home page.