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Franchise Law

Feature Story:

California Amends Its Franchise Relationship Law »

By Cheng Cohen

On October 11, 2015, California's governor signed into law a bill amending the California Franchise Relationship Act (CFRA). Here is what you need to know about the amendments.

1) The amendment applies only to agreements executed or renewed on or after January 1, 2016.
Note: Unless the franchise is of indefinite duration and can be terminated by either party without cause.

2) The amendment is designed to provide franchisees greater protection against termination.
The amendment affects the franchisor's ability to terminate in two important ways. First, with certain exceptions discussed below, it increases the required cure period from 30 days to at least 60 days (but no more than 75 days unless the parties separately agree to a longer cure period)...

Feature Story:

Avoiding Litigation Over System Changes »

By Cheng Cohen

Franchised brands are increasingly focused on implementing significant system changes. This trend is largely driven by maturing brands whose "makeovers" are necessary to keep the brand attractive and relevant, and by technological advances that are essential to operating efficiencies.
 
The biggest hurdle to system change often is franchisees who balk at the cost and time involved in making the change. Several recent lawsuits illustrate that when this happens there is a real risk of becoming embroiled in resource-draining litigation.

For example, Wendy's recently brought suit against its fourth-largest franchisee, who had challenged Wendy's right to require extensive remodeling to its restaurants and upgrades to the POS system...

Feature Story:

Multi-Unit Offerings & FDDs: New Guidelines Aim For Clarification »

By Tom Pitegoff

A new set of regulatory guidelines for franchisors provides clarity on how to present franchise opportunities to prospective buyers.

On Sept. 16, state regulators with the North American Securities Administrators Association (NASAA) issued guidance clarifying the distinctions between single-unit, area representative, and area development offerings and calling for uniform terminology when describing these arrangements in the FDD.

The FDD explains to prospective franchise buyers in plain English their obligations, fees, start-up costs, and the like. It also provides information about the franchisor and the assistance it will provide, in a uniform format that meets the requirements of both federal and state laws. NASAA wants to ensure that the disclosures in the FDD that deal with multi-unit franchise offerings are clear to prospective franchisees...

Feature Story:

What The NLRB's Joint Employer Position Means For Franchisors »

By Marlén Cortez Morris

On July 29, 2014, the General Counsel of the National Labor Relations Board (NLRB) announced in a very brief statement that he was authorizing the issuance of formal unfair labor practice complaints against McDonald's and some of its franchisees in 43 cases involving employees of the franchisees. Without explanation, the General Counsel stated that the complaints alleging violations of the National Labor Relations Act (NLRA) will proceed against both the franchisor and its franchisees as "joint employers" if a settlement is not reached. The General Counsel's statement has been labeled an "attack" on franchising and has led to uncertainty about what it means.

General Counsel's statement is not law
The General Counsel wants the NLRB to abandon a 30-year-old standard and adopt a new, broader standard for determining the existence of joint employment status for purposes of the NLRA...


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Franchise Update Magazine

Issue III, 2016

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