The FTC on March 10 posted a solicitation for public comments on several questions relating to the relationship between franchisors and franchisees, as well as to franchisors’ involvement in certain franchisee employment matters and the relationship with third-party suppliers to franchisees.
As noted in Restaurant Dive, many restaurant chains have spent the last few years pushing for growth through multi-unit franchisees, but challenges could lie ahead, as franchisees will likely face challenges due to high costs and pressure to use new technologies.
New policy effective as of January 1, 2023
Franchisors routinely require prospective franchisees to answer questions about the franchise sales process and the franchisee’s understanding of the franchise agreement in writing by marking “yes” or “no” in a questionnaire. Likewise, franchise agreements often include statements similar to those in the questionnaire. These take the form of acknowledgments the franchisee agrees to when signing the franchise agreement.
One of the frequent services my colleagues and I provide to franchisors is franchise sales compliance training. It is often an eye-opening experience for new franchisors, and even experienced franchisors can find it to be a stark reminder of how heavily regulated the business of selling franchises is.
No brand can be successful, or frankly, exist, without some form of advertising and marketing. However, the myriad of regulations that apply to advertising and marketing can make that vital activity seem fraught with peril.
New amendments to California franchising law broaden its regulations on franchisors. California Assembly Bill 676, signed by Governor Newsom on September 29, 2022, amends the California Franchise Relations Act (“CFRA”) and the California Franchise Investment Law (“CFIL”), which apply to the termination, nonrenewal, and transfer of franchises. The law’s sponsor, Assembly-member Chris Holden, claims the amendments to California franchise law will “rectify the unbalanced relationship between franchisee and franchisors.”
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.
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.
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.