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.
…
Continue Reading FTC Franchise Exemptions: Insiders Exemption

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 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.

In this blog post series, we summarize the exemptions available under the Federal Trade Commission Franchise Rule (“Rule”), which allow a franchisor to sell a franchise without an FDD. Any analysis of what exemptions apply to your brand is incomplete if you do not also consider the application of state law. States may not recognize the federal exemptions and may offer different exemptions to their registration requirements.

…
Continue Reading FTC Franchise Exemptions: Minimum Payment Exemption

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.

In this blog post series, we summarize the exemptions available under the Federal Trade Commission Franchise Rule (“Rule”), which allow a franchisor to sell a franchise without an FDD. Any analysis of what exemptions apply to your brand is incomplete if you do not also consider the application of state law. States may not recognize the federal exemptions and may offer different exemptions to their registration requirements.

…
Continue Reading FTC Franchise Exemptions: Large Franchisee Exemption

In 2020, most franchises experienced unprecedented disruptions in both franchise operations and development.  Franchisors should consider how to use their FDD update process to position their brand for success with both prospective and existing franchisees.  In this webinar, leading franchise attorney Ritchie Taylor shares actionable strategies to maximize success as we enter the new…

Despite the challenges of COVID-19 for many franchise systems, franchisors can still be successful in supporting their current franchisees and recruiting new franchisees. In this webinar, Steve Beagelman, President & CEO of SMB Franchise Advisors, discusses the best practices for improved franchise development during the COVID-19 “new normal.”

Franchisors must begin by ensuring that…

One central benefit that franchisees seek from joining a franchise system is the leadership of the franchisor’s team. This team controls the brand standards, leads national marketing, gives advice and support, and is responsible for brand innovation and development.

Item 2 of the Franchise Disclosure Document (“FDD”) discloses to prospective franchisees who these leaders are and their business experience. Item 2 also discloses who is involved in franchise sales and operations. However, under the requirements of the FTC Franchise Rule, not every leader, manager, or salesperson needs to be included. The below lists summarize who needs to be included in Item 2 and who does not.

…
Continue Reading Who’s Who in Item 2?

In 2020, banks had to contend with general new underwriting guidance in SOPs, COVID-19 specific underwriting guidance, and the rules about the Paycheck Protection Program (“PPP”). All of these circumstances impacted the availability of funding for franchisors and franchisees. Despite the uncertainties about the economy and trend towards more conservative lending, the good news is…