Franchising & Distribution Law Blog

Illinois is joining the online filing platform of the North American Securities Administrators Association (NASAA), allowing for franchise filings to be done online, as opposed to in hard copy, according to a Sept. 1, 2022, announcement. 

As energy companies and convenience retailers continue to adapt in a transitioning energy industry, the 2022 Petroleum Marketing Attorneys’ Meeting highlighted important developments including those related to electric vehicles, privacy laws and antitrust considerations. The following are five key takeaways from the conference, which explores issues affecting energy companies and distributors.

Franchisors beware: The Federal Trade Commission is making it very easy for franchisees to file fraud complaints against you. In publicizing its fraud reporting tool – aptly named ReportFraud.FTC.gov – the FTC has fired another warning shot that it is ramping up enforcement efforts against you.

The Federal Trade Commission has recently been sending “Notices of Penalty Offenses Concerning Money-Making Opportunities and Endorsements and Testimonials” to franchisors and companies selling other types of business opportunities. These notices from the federal consumer protection agency are seemingly coming from out of the blue and being served on registered agents similar to a lawsuit, causing recipients a fair amount of concern. Although the FTC tells the recipient that it is not being singled out (see this list of businesses who received the notice in October), it warns in bold letters on the first page that the recipient is now on notice that engaging in certain conduct could subject the company to civil penalties up to $43,792 per violation. A sample of the letters being sent to businesses can be viewed here.

Greensfelder Officer Beata Krakus was recently featured by 1851 Franchise as a 2021 Top Franchise Legal Player. Check out the publication’s interview with Beata to find out what drew her to franchising, the most common mistake franchise brands make, and what she thinks is the biggest legal hurdle facing the franchising industry in 2022.

With the COVID-19 pandemic affecting the performance of many businesses in 2020, franchisors are faced with a whole new set of considerations when preparing their 2021 franchise disclosure documents, including whether to include financial performance representations from 2020.

Dawn Johnson, Beata Krakus, Susan Meyer, Abby Risner, and Leonard Vines recently attended two virtual franchise programs – the International Franchise Association Annual Convention and the American Bar Association Forum on Franchising. 

Greensfelder summer associate Kiran Jeevanjee contributed to this blog post.

Native American tribes occupy a unique position within the American legal system, and understanding these issues is vital for any franchisor considering a tribe as a potential franchisee. Federally recognized Native American tribes are classified as “domestic dependent nations” — meaning that the tribes are considered “distinct independent political communities” and can govern their own internal affairs. The most important consequence of this classification from a business perspective is that such tribes are entitled to tribal sovereign immunity that protects them from any civil suits or criminal prosecutions to which they did not consent.

Although the full impact of COVID-19 remains unknown, many franchisors are looking to the future and new opportunities for franchise sales. Some franchises may be dramatically affected, either temporarily or permanently, and may have to significantly alter their business model to remain profitable. Others might actually benefit from the pandemic.

As required every four years, adjustments to the FTC Franchise Rule’s monetary thresholds for certain exemptions are on the way.

The exemptions under the FTC Franchise Rule are intended to exclude franchise transactions in which the prospective franchisee doesn’t need the protection the rule is intended to provide. As several exemptions available under the FTC Franchise Rule are tied to dollar thresholds, they need to be adjusted from time to time to remain relevant. For example, when the current rule was adopted in 2007, a franchise sale was exempt from the FTC Franchise Rule’s disclosure requirements if the payments from the franchisee to the franchisor in the first six months of the franchisee’s operations did not exceed $500. Adjustment of the dollar threshold is necessary for this exemption not to become irrelevant with inflation.