Are there laws governing franchisor franchisee relationships?

Are there laws governing franchisor franchisee relationships?

The franchise laws are a combination of federal and state laws that govern the registration, offer and sale of franchises, and the legal relationship between franchisors and franchisees.

What are the laws regulating franchising?

At the federal level, by the Federal Trade Commission (the “FTC”) through its FTC Franchise Rule, and at the state level, by various states’ franchise registration/disclosure laws; franchise relationship laws; business opportunity laws; and “little FTC” acts. …

Is franchising regulated?

The ongoing franchisor–franchisee relationship is often regulated by antitrust, unfair competition and consumer law. A duty of good faith also impacts upon franchising in civil law jurisdictions, although not in common law jurisdictions, which take a very different approach to the concept of good faith.

What is a protected franchise?

A protected franchise territory refers to a specific area that a franchisor grants the franchisee the right to operate within, meaning other franchisees and sometimes the franchisor itself are unable to enter that market.

Can a franchisor set prices?

Some of the most-common pricing policies that franchisors use include: Suggested Retail Pricing – While franchisors are free to “suggest” retail prices, they cannot coerce franchisees to comply with suggested pricing.

What is the one significant federal law regarding franchises?

The federal FTC Franchise Rule imposes a pre-sale disclosure requirement that applies to all states, obligating franchisors to furnish prospective franchisees with the material terms of the franchise relationship prior to consummating the sale of a franchise.

What is a franchise legally?

1. A relationship wherein a business organization, called a franchiser, in exchange for a fee and with the franchisor’s guidance, allows another business, called the franchisee, to operate under the franchiser’s trade name and offer the franchiser’s products or services.

What is territory protection?

Many franchisors grant to their franchisees an exclusive territory. These territories are commonly known as protected territories, or areas of protection. As the name suggests, the purpose of a protected territory is to provide franchisees with protection.

What is a franchise territory?

A franchise territory is the area within which a franchisee is authorized to establish and operate a franchised business.

Do franchise owners have to work?

There are a variety of places a franchise owner can work, depending on the type of franchise they own. Some franchise owners choose to take an active role, and will work alongside their employees, while at the same time managing the business.

What are the rights of a franchisor?

The right to the franchisors loyalty, good faith and fair dealing, and due care in the performance of the franchisors duties, and a fiduciary relationship where one has been promised or created by conduct. The right to reasonable restraints upon the franchisors ability to require changes within the franchise system.

What is the purpose of the Franchise Rule?

16 CFR Parts 436 and 437. Rule Summary: The Franchise Rule gives prospective purchasers of franchises the material information they need in order to weigh the risks and benefits of such an investment.

What is the Federal Trade Commission Franchise Rule?

The Franchise Rule gives prospective purchasers of franchises the material information they need in order to weigh the risks and benefits of such an investment. The Rule requires franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise,…

How are franchisors required to disclose franchise information?

Franchisors disclose this material information in a prescribed format commonly referred to as a Franchise Disclosure Document (“FDD”). In addition, at the state level, 15 states have registration and/or disclosure requirements that must be met before a franchise can be offered and sold in that state.

What is the Franchise Investment Law in California?

The Franchise Investment Law governs the offer and sale of franchises in California. Please visit About the California Franchise Investment Law to know more information. To view the files you MUST have Adobe Acrobat Reader installed on your system.