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What is franchise law?
What is franchise law?
Franchise law is a set of laws that govern the relationship between a franchisor and a franchisee. It covers the rights and obligations of both parties, as well as the terms and conditions of the franchise agreement. Franchise law also covers the disclosure of information to potential franchisees, the transfer of the franchise, and the termination of the franchise agreement.
I often have potential clients who have tried to avoid franchising due to its cost and complexity by entering into a “license agreement.” A franchise is a type of license agreement so, unfortunately, these individuals may have unintentionally violated the Federal Trade Commission’s Franchise Rule. While unintentional, the client has violated the federal and often state laws and should seek to resolve these issues.
The franchise rule defines a franchise as a continuing commercial relationship created by any arrangement where (1) the franchisee sells goods or services that are associated with the franchisor’s trademark or must meet the franchisor’s quality standards, (2) the franchisor exercises significant control over, or gives the franchisee significant assistance in, the franchisee’s method of operation, and (3) the franchisee, as a condition of obtaining or commencing operation, is required to make payments aggregating more than $500 within six months of commencing such operation.
What constitutes significant control or assistance under the regulation depends in large part on how reliant the franchisee is on the expertise of the franchisor to reduce its business risks or enhance its chances for success. The significant controls over operations include those involving site approval, hours of operation, production techniques, personnel policies, accounting practices, advertising and promotional campaigns, and location or sales area restrictions. Significant promises of assistance include formal training programs, the establishment of accounting systems, the selection of site locations, and the provision of a detailed operating manual.
There are a number of exemptions to the franchise rule that may be available to you. Our practice includes assistance in complying with the franchise laws or seeking exemptions to it.
Charlie Barnett
Admitted to the bar in 1977, Charles (Charlie) Barnett has over 40 years of experience as an attorney. During his time in the field, he represented numerous small to medium-sized businesses, ranging from small startups to IPOs.Charlie hails from Louisville, Kentucky and now lives in Palm Beach, FL. He went to the University of Louisville for his undergrad before finishing his law degree at the University of Florida. After passing the bar exam, Charlie went back to his hometown where he joined his father’s regional law firm, Barnett & Alagia, as a junior partner.Since then, Charlie has worked tirelessly as an attorney. For years, he was the general counsel for Miami Subs Grill and Kenny Rogers Roasters, during which time he created the franchise frameworks used by countless franchisees. Following his time as a general counsel, Charlie founded his own legal office. He was also the brains behind his practice’s “Out of House” legal counsel concept, which helps businesses of all sizes receive cost-effective, flexible, and high-quality legal services.Outside of his outstanding work as an attorney, Charlie is a proud father to four children, now all successful adults. He has also worked with charter schools for the better part of a decade and is currently Chairman of the Board for a K-5 charter school in Hialeah, FL.
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