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By Beata Krakus on January 7, 2016 at 9:27 AM

The new year is upon us, and franchisors across the U.S. are focusing on updating their franchise disclosure documents and renewing their franchise registrations. In this busy time, it is easy to overlook other filing requirements for franchisors.

Since 2009, franchisors that have at least one franchisee that does business in New York state and is required to be registered as a sales tax vendor are required to file information returns with the New York State Department of Taxation and Finance. The reporting period is from March 1 to February 28 (or 29) of the subsequent year. The return is due on March 20.

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By Megha Shah on December 28, 2015 at 8:45 AM

In the aftermath of a significant change in the joint employer standard this year, several states are attempting to address how franchisors are affected.

Legislation aims to stop fallout from joint employer status changesIn August, the National Labor Relations Board (NLRB) released a decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Recyclery, 362 NLRB No. 186 (Aug. 27, 2015), drastically expanding the standard for determining whether an entity was a joint employer. (See our blog post about it here). In doing so, the NLRB veered away from precedent that required a showing that a company exerted actual control over the employees of another company in order for the first company to be considered a joint employer.

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By Beata Krakus on December 19, 2014 at 9:14 AM

Today the Office of the General Counsel of the National Labor Relations Board (“NLRB”) took its next step in the investigation of labor practices within the McDonald’s franchise system and issued consolidated complaints against McDonald’s franchisees and the franchisor – McDonald’s USA, LLC on the theory that the franchisor is a joint employer with its franchisees. Consistent with General Counsel’s amicus brief in the Browning-Ferris matter that was filed this summer, the focus of the complaints appear to be on the use of technology and tools that allows franchisors insight and potential control over franchisee operations.

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By Leonard Vines on September 2, 2014 at 8:52 AM

Fresh pizza in plain open boxIn a closely watched case with far-reaching implications, the California Supreme Court determined that Domino’s Pizza, the franchisor, should not be held liable for the alleged sexual harassment by an employee of one of its franchisees. The lengthy, well-reasoned decision gave great weight to the contemporary realities of the franchise business model and the unique nature of franchising. Noting how franchising has become such an important and thriving part of our economy, the Court followed the modern, enlightened view and rejected the reasoning of the old line of cases that found a franchisor vicariously liable for acts of its franchisees based on the degree of control they exercised over their franchisees.

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By Franchising & Distribution Group on April 30, 2014 at 9:42 AM

Baer_JR-75John Baer and his co-authors, Anders Fernlund - NOVA, Susan Grueneberg - Snell & Wilmer, LLP, and Jane LaFranchi - Marriott International, Inc., discuss the challenges a non-U.S. franchisor will face in entering the U.S. Market in the article, "Taking the Leap: Bringing a Foreign Brand to the United States," published by the International Journal of Franchising Law. Read the article.

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By Daniel Garner on April 1, 2014 at 6:43 PM

j0399041In 2010, the United States Supreme Court famously ruled that in cases under the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2801 et seq., a franchisee could not state a claim for constructive termination unless the franchisor’s actions actually caused the franchisee to abandon its franchise. Mac's Shell Service v. Shell Oil Prods. Co., 559 U.S. 175 (2010). Earlier this month, relying on this rule from Mac’s Shell, a federal district court in New Jersey ruled that two urgent care franchisees likewise could not state a claim for constructive termination under the New Jersey Franchise Practices Act where their franchisor’s challenged conduct did not actually cause them to abandon their franchises. See Pai v. DRX Urgent Care, LLC, Nos. 13–4333, 13–3558, 2014 WL 837158 (D. N.J. March 4,2014).

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By Daniel Garner on January 13, 2014 at 2:53 PM

Emmanuel Joseph was a franchised gasoline retailer for Chicago-area fuel distributor Sasafrasnet, LLC, who operated a BP-branded gasoline station in Chicago. In November 2010, Sasafrasnet notified Mr. Joseph that it was going to terminate his franchise under the Petroleum Marketing Practices Act (“PMPA”) because, on three separate occasions, it had been unable to electronically debit Mr. Joseph’s account to pay for fuel deliveries because his bank account did not have sufficient funds. Mr. Joseph filed suit and sought a preliminary injunction under the PMPA to enjoin Sasafrasnet from terminating him, but the district court denied the motion.

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By Joshua Stevens on December 11, 2013 at 4:32 PM

Recently, the United States District Court for the Southern District of Indiana denied franchisor Steak n Shake’s motions to compel the non-binding arbitration of three consolidated lawsuits filed by three franchisees. The decision highlights the importance of a franchisor carefully monitoring and updating its dispute resolution policies in the context of the legal risks facing its system.

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By David Simmons on November 13, 2013 at 3:35 PM

The United States District Court for the Eastern District of Pennsylvania recently enforced a non-compete clause in a franchise agreement and granted a franchisor a preliminary injunction against its former franchisee. The court noted that Pennsylvania law recognizes that a franchisor has a legitimate business interest that can be protected by a non-compete clause, and that there was adequate consideration for the non-compete clause in that the clause was entered into as a condition of the franchise relationship. The court then analyzed if the non-compete clause was “reasonably limited in both time and territory.” The non-compete clause at issue had a duration of two years and the geographic scope of the clause was limited to ten miles from the perimeter of the franchisee’s former territory or the territory of any other franchisee.

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By Abby Risner on June 28, 2013 at 1:46 PM

DelawareBlogPostAlt2

This month, Delaware passed a law to clarify that the franchisor/franchisee relationship is not an employment relationship. The law applies to relationships that are defined as a franchise under the Federal Trade Commission franchise rule.

As we previously discussed, some states - including Delaware now - are adopting legislation to clarify that franchises are independent contractors. These laws come in the wake of cases that find franchisees to have an employment relationship.

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