Legislation - Franchise Law News

A State of Washington Appellate Court ruling (Marte v. Hernandez, May 16, 2011) demonstrates that deception can cause even blood relationships to disintegrate.
In this case, two brothers formed a partnership and purchased two McDonald's franchises. McDonald's does not sell franchises to partnerships. It sells franchises only to individuals or to entities wholly owned by an individual (both the equity interests and any interests in profits). To avoid McDonald's requirements, only one of the brothers applied to McDonald's as a franchisee, while the other was a financial investor and partner providing a portion of the money needed to purchase the franchise and fund the initial operating costs. The brothers concealed the existence of the partnership and further misrepresented the purpose of the investor brother's financial contributions to the partnership...

Franchise systems must stay dynamic, not static. Reduced recessionary spending demands introduction of new product assortments and pricing programs. Decreases in franchisees' financial performance mandates a product line adjustment. Whether driven by external or internal forces, every franchise system must be prepared to adapt to remain relevant, viable, and competitive.
Once a franchisor determines that change is necessary, it faces the challenge of implementing that change throughout the system. How it approaches such change could determine whether the franchisor wins or loses that challenge.

In January 2007, the FTC released the amended FTC Rule on Franchising and made compliance mandatory by July 1, 2008. Since then, many of the states with franchise registration laws have also amended their laws to conform to the FTC's changes. Violations of the FTC Rule and state franchise laws can have a profound negative impact on a franchisor, its officers, directors, and sales staff, and can even lead to jail time. We thought we would take this opportunity, more than three years after the release date, to offer you a short quiz to gauge how well you remember some of the important current requirements. Let's get started. (Answers at bottom.)

1. True or false? The new FTC rule no longer requires franchisors to deliver an FDD at the first "personal" or "face-to-face" meeting with the prospective franchisee...

Consumers have an infinite number of ways and places to talk about your brand. Social media platforms such as Facebook, LinkedIn, Twitter, online blogs, podcasts and YouTube are fundamentally changing the way we work and interact with each other, with an increasing blurring of business, commercial, social and personal communications. As a result, these social media platforms can provide beneficial (and inexpensive) ways for franchisors and franchisees to market and promote their products and services.
While social media can provide great brand promotion opportunities, it also can be very dangerous. Social media is often viewed as a fast and informal means of communication, and given the fast-paced nature of social media, one can easily get caught up in the rapid back-and-forth responses inherent in the social media environment...