The franchisor has just informed you that the franchise disclosure document (“FDD”) is finally ready to go, and you are thrilled to begin talking to prospective franchisees about the best new concept you’ve seen. You are of course aware of the requirement to register in certain states https://www.franchisefeed.net/2024/07/franchise-state-compliance/ with franchise registration and disclosure laws, but
Reducing Risks in Implementing Gift Cards and Loyalty Programs
Gift cards and loyalty programs can be effective tools in generating sales, developing brand awareness, generating actionable customer data, and driving repeat business. When these programs are implemented on a single-store basis they fairly straightforward to administer. When rolled out through a network of independently owned franchised business, these programs require more attention and planning
What to Make of the New FTC Franchise Guidance
The Federal Trade Commission (“FTC”) has taken a renewed interest in the Franchise Rule and the relationships between franchisors and franchisees. In March 2023, the FTC requested comments from franchisors and franchisees. On July 12, 2024, the FTC took three distinct actions to showcase some of what it learned from those comments and its current
How the New FTC Rule Banning Non-Competes Affects Franchisors
In April 2024, the Federal Trade Commission (“FTC”) issued a new rule that broadly prohibited the use of non-competition agreements (“non-competes”) for workers. This rule goes into effect September 4, 2024, but is expected to be subject to significant challenges in court. While the landscape and timing for the rule is likely to continue to
Finding a Balance Between Consistency and Innovations in Franchise Systems
When a customer walks into a franchise location in Seattle, Washington, does the customer have the same experience as it would when it visits a location in Miami, Florida? What about Lincoln, Nebraska? One of the hallmarks of franchising is that each franchisee is expected to operate in accordance with brand standards and deliver the
Should I Franchise My Business? Six Indicators that you are Ready to Start Franchising
With the opening of another year, you may be considering brand expansion through franchising. While there is no magic formula to tell you if you would be a good franchisor or if your business is a perfect fit for the franchise model, the questions below provide a starting point for your analysis. What underlies each
Who Needs Brick-and-Mortar? Developing Your Mobile Franchise Business
The average consumer probably associates franchising with the popular fast casual restaurant across the street from their office, their favorite gym down the street, or some other brick-and-mortar building where they obtain routine or specialized products and services. Franchising, however, covers a broad scope of industries and many operate without a brick-and-mortar location where the
Twitter’s X-treme Rebrand: What You Need to Know
The recent rebranding of Twitter to X has jolted users of the social media platform and the public generally. The move has been met with mixed reactions, with some praising the change as a bold new direction for the company and others criticizing it as a risky and unnecessary gamble.
From an intellectual property protection
5 Questions Franchisors Should Consider When Creating a Franchisee Territory
At some point in most franchise sales conversations a prospective franchisee will ask “So, what’s the size of my territory?” Some franchisors grant franchisees a geographic area, or territory, in which the franchisor agrees not to conduct certain competitive activity, like placing another unit. For some types of businesses, the territory is the only area
FTC Franchise Exemptions: Leased Departments, Petroleum Sellers, and Oral Contracts
Franchise disclosure obligations and registration can carry significant costs of compliance and can be an administrative burden. Initially drafting a compliant Franchise Disclosure Document (“FDD”) is a time-intensive process. Then the franchisor must update the FDD annually for as long as it wishes to sell franchises. State registration of the franchisor and review of the FDD can further delay franchise sales. Additionally, an FDD contains confidential information that the franchisor may not wish to make public, especially if the business is a particularly sensitive to competition. Franchise laws restrict otherwise legal sales practices, such as making financial performance representations outside of Item 19, which can be another frustration for franchisors.
Exemptions to the franchise disclosure and registration laws provide both seasoned and start up franchisors the opportunity to reduce these burdens and costs by either (1) avoiding registration in a state or (2) avoiding drafting an FDD at all.
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