Franchising & Distribution Law Blog

In Wells v. Holiday Companies, Inc., No. A12–1476, 2013 WL 777384 (Minn. Ct. App. 2013), the Minnesota Court of Appeals reversed an order granting a motion to dismiss a class action lawsuit alleging that car wash receipts constitute gift cards that cannot expire under state law.

At the 36th Annual Forum on Franchising, Beata Krakus was recognized by the ABA with the Chair’s Future Leader Award. This award recognizes young and/or diverse Forum members who have demonstrated a substantial commitment to the Forum by undertaking significant leadership efforts, such as mentoring other Forum members or law students interested in pursuing careers in franchise law; working on membership marketing or other outreach efforts; assistance with special projects undertaken by the Forum Governing Committee or a Forum Division; or assisting with the Forum's annual meeting.

Recently, the Eighth Circuit affirmed a ruling upholding Missouri’s liquor statute requiring a corporation that wants to obtain a wholesaler license for the sale of intoxicating liquor containing alcohol in excess of five percent to be a “resident corporation.” Pursuant to Missouri’s statute, to qualify as a “resident corporation” requires that, among other things, all officers and directors be residents of Missouri for the three years immediately prior to filing the application. Additionally, all resident stockholders must own at least sixty percent of all the financial interests in the business.

The North American Securities Administrators Association, Inc. (NASAA) has released, for both public and internal comment, a proposed Multi-Unit Commentary related to disclosure of multi-unit franchising arrangements under the various state franchise disclosure laws.

Thank you to everyone who attended the 2013 Distribution Symposium. Below are some key points for you to keep in mind when bringing your products or services to the market. We look forward to seeing you at the 2014 Distribution Symposium.

• Be prepared to adapt to change quickly to continue growing your business.

• Keep in mind Dave Peacock's principles for effective distribution:

• Transparency: Always be clear on intentions and expectations

• Accountability: Consequences for failure to perform

• Discipline: Routine, financial, "inspect what you expect"

• Integrity: Do what you say you are going to do

• Ambidexterity: Must be able to adapt/change with business

• Ownership: Active owners are key - owners make the difference

• Great People: Great people attract more of the same

• Make sure your contracts are adapted to your business and reflect your current practices.

• Ensure objectives are communicated down the distribution chain and that information is sent back up.

• Make your company a learning organization: track failures and what you learned from them. If an initiative is unsuccessful, be sure to record your learnings so they are not lost.

In response to the rapid growth of gift card sales and the variety of ways in which they are sold and redeemed, the IRS has been issuing guidance to address accounting issues associated with such sales. Most recently, the IRS issued Rev. Proc. 2013-29, which addresses the tax treatment of gift cards sold by one entity and redeemable by an unrelated entity. Prior to the issuance of Rev. Proc. 2013-29, if a taxpayer sold gift cards redeemable by an unrelated entity, the taxpayer would recognize as income the full value of the gift cards in the year of sale. The new guidance, however, allows a taxpayer to sell gift cards in one year, and in some circumstances, delay recognizing income from those sales until the subsequent year.