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The Franchise Memorandum

The Franchise Memorandum

Posts in Legislation and Rulemaking.

Laws that just became effective in Belgium and Netherlands may have a major impact on how franchisors conduct business there.

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As a part of its decennial review of the Franchise Rule, which is required by a series of executive orders, the FTC invited interested parties to participate in a Virtual Public Workshop on November 10, 2020 to discuss potential changes to the Rule. Lathrop GPM was one of nine law firms and independent lawyers asked to comment on proposed changes, in particular, changes to the FDD format. While acknowledging that current FDD requirements do result in long documents, and applauding efforts by the FTC and NASAA to make the document easier to navigate and understand, Lathrop GPM cited ...

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Since the beginning of 2020, new, comprehensive franchising regulatory schemes have become effective in Belgium, Netherlands, Saudi Arabia, South Korea, and Thailand; Cambodia has adopted a filing requirement; and Brazil, Malaysia, Ontario, Canada, and South Korea have all amended their existing franchise laws.

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As part of its periodic adjustment for inflation, the Federal Trade Commission has announced in a press release the new monetary thresholds for certain exemptions from disclosure under the FTC’s Franchise Rule. Although the Franchise Rule generally requires a franchisor to disclose key information to a prospective buyer before selling a franchise, 16 C.F.R. § 436.8 contains various exemptions, including three based on monetary thresholds for the sale. As of July 1, 2020, disclosure to a prospective buyer is not required under the Franchise Rule if:

  • The buyer pays less than $615 ...
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On March 21, 2020, Indiana’s governor signed into law HB 1049, which amends Indiana’s franchise disclosure law to define changes requiring an amendment to franchise registrations and FDDs. Effective July 1, 2020, franchisors must file amendments to their FDD no later than 30 days after the occurrence of a material change in the information contained in the FDD. The statute enumerates various events that constitute a material change, including: (i) the termination, closing, failure to renew, or reacquisition of 10% of all franchises in a franchisor’s system, or 10% of the ...

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In another significant development in the area of joint employer law, the Department of Labor (DOL) has released its final joint employer rule to revise and update its regulation interpreting joint employer status under the FLSA. The new rule provides a four-part test asking: whether or not the company can hire or fire the employee; whether it supervises the employee’s work schedule; whether it sets their pay; and if it maintains their employment records. This four-part test returns the standard to its traditional definition. The effective date of the rule is March 16, 2020, and ...

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In the wake of the California legislature’s passage of AB-5 in September, thought leaders continue to examine how the new legislation may impact the franchising industry in California. A few recent cases are likely to have an impact. Each of these cases examines Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court decision that AB-5 is intended to codify, and the “ABC Test” for determining whether a worker is an “employee” or an “independent contractor” that is described therein. First, in Gonzales v. San Gabriel Transit, Inc., a California ...

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Making major changes to employment law in California, AB-5 codifies the holding in Dynamex Operations West, Inc. v. Superior Court, which established the so-called “ABC test” for determining whether a worker is an “employee” or an “independent contractor” in California. The ABC test creates a rebuttable presumption that a worker who performs services for hire in exchange for remuneration is an employee, unless the hiring entity can demonstrate that: (a) the individual is free from the control and direction of the hiring entity in connection with the performance of ...

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In response to a request for comment from the Federal Trade Commission on whether its Franchising Trade Regulation Rule should continue or be modified, Gray Plant Mooty has submitted a recommendation that the rule continue without modification. The Commission reviews its rules and guides periodically and solicits public comment to seek information about their costs and benefits, as well as their regulatory and economic impact. The rule makes it an unfair or deceptive act or practice for franchisors to fail to give prospective franchisees an FDD providing specified information ...

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New rules from the Food and Drug Administration take effect on May 7, 2018, requiring certain businesses selling food to disclose calorie counts on their menus. The FDA’s menu labeling rules were previously scheduled to take effect in May 2017, but a strong lobbying effort from the restaurant industry led to a delay in implementation. The new rules apply to restaurants and similar businesses with 20 or more locations operating under a common name and offering substantially similar menu items. If enacted, a recent bill, the Common Sense Nutrition Disclosure Act, could loosen some of ...

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After review by the French Constitutional Court, the French Parliament recently passed a controversial labor law commonly referred to as the “El Khomri” law (the “Law”). Article 64 of the Law contains provisions governing certain franchises. It is triggered if: (1) a franchise network contains at least 300 employees in France, inclusive of the employees of both franchisors and franchisees, and (2) the underlying franchise agreement contains terms that “have an effect on the organization of work and the conditions of work.” If those two requirements are satisfied ...

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After several years of consideration, the United States Congress has enacted the Defend Trade Secrets Act ("DTSA"), the first federal law designed to protect companies' trade secrets. The DTSA passed with strong bipartisan support, and it was signed into law on May 11, 2016.

Prior to the enactment of the DTSA, businesses seeking to hold someone accountable for the misappropriation of their trade secrets had to rely on the Uniform Trade Secrets Act ("UTSA"), a version of which has been adopted in forty-eight states. Although there is significant overlap between most states' version ...

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On April 7, 2016, the Nebraska legislature passed and Governor Pete Ricketts signed into law modifications to Nebraska's Franchise Practices Act (the "Franchise Act") and Seller-Assisted Marketing Plan Act (the "SAMP Act") that direct courts and arbitrators to use what is generally known as the "blue pencil" rule when asked to enforce noncompete provisions in franchise agreements subject to Nebraska law. See Franchise Act, Neb. Rev. Stat. §§ 87-402, -404; SAMP Act, Neb. Rev. Stat. § 59-1724. Nebraska had been one of only a handful of jurisdictions in which courts refused to reform ...

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As we reported in Issue No. 198 of The GPMemorandum, AB 525, which amends the California Franchise Relations Act ("CFRA"), applies to all franchise agreements entered into or renewed after January 1, 2016. Under the amendments, franchisors that prevent a terminated or nonrenewed franchisee from "retaining control of the principal place of the franchise business" will be required to purchase the franchisee's assets. One issue raised by this new provision is whether language in franchise agreements, conditional lease assignments, or leases that gives a franchisor certain ...

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The Office of Federal Contract Compliance Programs recently announced final rules changing federal contractors' affirmative action requirements for individuals with disabilities under section 503 of the Rehabilitation Act and protected veterans under the Vietnam Era Veterans' Readjustment Assistance Act. The final rules became effective March 24, 2014. These new rules mandate various changes to the content and implementation of contractors' affirmative action plans for these protected classes. Compliance with some changes was required by March 24, while other changes ...

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Congress is considering overruling the United States Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), in which the court overturned near century-old precedent and held that manufacturers could set minimum price standards for retailers if they encouraged competition.  By eliminating the threat of per se liability, some have believed that Leegin provided suppliers and franchisors with at least limited comfort in setting minimum resale prices for their dealers and franchisees.  But even this may be short-lived.  On January ...

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New Jersey recently expanded the scope of its Franchise Practices Act to include persons or entities who do not make a majority of their sales directly to consumers and who have “an office or warehouse from which franchisee personnel visit or call upon customers or from which the franchisor’s goods are delivered to customers.”  Before, a franchisee was entitled to the Act’s protections only if it maintained “a fixed geographical location at which the franchisee offers and displays for sale the franchisor’s goods or offers for sale and sells the franchisor’s ...

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On May 18, 2009, the FTC posted five new Frequently Asked Questions on its website (FAQs 29-33). All 33 FAQs and the FTC staff’s respective responses can be found at http://www.ftc.gov/bcp/franchise/amended-rule-faqs.shtml. The release of the new FAQs occurred on the same day that Craig Tregillus, FTC Franchise Rule Coordinator, participated in an “Ask the Regulators” session at the International Franchise Association’s 42nd Annual Legal Symposium. Consequently, Mr. Tregillus was able to give those in attendance a first-hand introduction to these important new ...

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Following its adoption of the 2008 Franchise Registration and Disclosure Guidelines in June 2008, the North American Securities Administrators Association, Inc. (NASAA) released a proposed Commentary to those guidelines and accepted comments to the same until October 23, 2008. After reviewing and analyzing the comments it received, NASAA on April 27, 2009, adopted a final version of the Commentary, a copy of which can be obtained at www.nasaa.org/Industry___Regulatory_Resources/Franchise/. While NASAA made some minor revisions and clarifications to the proposed ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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