Tag Archives: franchise law

ILN Today Post

Ohio’s Habitual Offenders Program can have devastating effects for businesses that fail to comply with sales tax filing and payment requirements

In Ohio, a consistent failure to comply with sales tax filing and payment requirements may result in a business’ tax account being placed in the Habitual Offenders Program (HOP), a statutory mandated tax delinquency program that can have devastating effects on any business. READ MORE

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Sole discretion and your franchise agreement

Many, if not all, franchise agreements have provisions giving the franchisor sole and absolute discretion to take or approve some action. On its face, an agreement in which the parties agree in advance to give sole discretion in decision making would appear to be virtually bullet proof from attack. However, there are exceptions. READ MORE

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Small Business Reorganization Act provides a new tool to restructure small franchisees

In an effort to make Chapter 11 relevant again, the president recently signed into law the Small Business Reorganization Act of 2019, which adds a new subchapter to Chapter 11 of the Bankruptcy Code intended to streamline the Chapter 11 bankruptcy process for companies that might not otherwise be able to afford the Chapter 11. READ MORE

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Are social media influencers a valuable opportunity or potential liability to your franchise?

Using a social media influencer marketing campaign may seem like an organic or seamless way to promote a business. However, using influencer marketing may have legal implications for franchisors and franchisees subject to business opportunity laws and other federal regulations. READ MORE

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Franchisee Who Ignored His Disclosure Document Loses Lawsuit

Writers BlockA franchisee who sued his franchisor for fraud learned the hard way why it’s important to read the Franchise Disclosure Document, cover to cover, before buying a franchise. A California franchisee of Big O Tires sued the company in California court, alleging that Big O defrauded him when it sold him a franchise. The California Court of Appeals ruled against him because the disclosure document Big O gave to the franchisee before he bought contradicted each and every one of his claims.

Mr. Hailemariam purchased his Big O Tires franchise in February 2008. Before he bought the franchise, he received Big O’s Uniform Franchise Offering Circular (“UFOC”). The UFOC was similar in content and structure to the Franchise Disclosure Document that franchisors are now legally required to give prospective franchisees.

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Avoiding Common Franchising Pitfalls for Franchisees

Parties can risk significant legal liability if they enter into an agreement without understanding whether their business transaction is regulated as a franchise. Franchises are regulated by the Federal Trade Commission (FTC) under the FTC’s rule, Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunities (16 C.F.R. §§ 436-437) (Franchise Rule), and by the laws of some states. A failure to comply with the Franchise Rule can constitute an unfair or deceptive act or practice in violation of Section 5 of the FTC Act. More…

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Exclusivity Rights Come with a Price

Prior to diving into the franchise pool for that perfect chunk of a franchise, make sure whether your franchise territory is exclusive or non-exclusive? If it’s exclusive then same brand’s franchise in the given territory won’t let you affect your sales and if it’s non-exclusive then one has to be extra vigilant as the same brand’s franchisee can become a hindrance in fetching revenues. Read on about the pros and cons of the same…More…

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Increased liability for franchises?

Since the emergence of The Commerce (Cartels and Other Matters) Amendment Bill from the Select Committee in May 2013, a number of issues have arisen concerning the effect on franchises. The main thrust of the legislation is aimed at introducing criminal sanctions for ‘hard core’ criminal activity and with franchises not given specific treatment under the Bill the risk of criminal sanction for parties to franchise agreements is reasonably high.

The Bill is currently awaiting consideration of the Select Committee’s report and Second Reading in the House. More…

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Franchise Alert: Attention auto dealers: What constitutes good cause to terminate your dealership agreement?

Under Ohio law, a franchisor must have “good cause” in order to terminate a motor vehicle franchise. That good cause cannot include the failure to achieve any unreasonable or discriminatory performance criteria. In order to comply with the law, the Japanese auto manufacturer Nissan instituted a standard benchmark for sales performance known as the regional sales effectiveness or RSE. The RSE applied to every Nissan dealership in Ohio. On June 25, 2013, an Ohio appellate court held, in Sims v. Nissan North American Incorporated, that Nissan’s attempt to be non-discriminatory was, in fact, unreasonable and discriminatory because the creation of such a broad standard ignored the different markets in which franchisees in Ohio compete.

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Franchises Alert: Attention restaurant operators: The Perishable Agricultural Commodities Act may apply to you

Both sellers and buyers of perishable agricultural commodities need to be careful to comply with PACA’s rules and regulations. Directors and officers of buyers of perishable agricultural commodities subject to PACA must be aware of their fiduciary duties in order to avoid potential individual liability. Finally, parties need to be aware of the defenses to alleged PACA trust claims. PACA trust claims are not automatic and sellers may lose the benefits under a PACA trust if they take or fail to take certain actions.

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