1. Today, every state in the nation has its own
law regulating offers and sales of franchises.
2. Before a franchisor can sell a franchise, the
franchisee is entitled to a three-day cooling off period.
3. When one company provides another with a
marketing plan for selling goods or services, in substantial
association with the licensor's trademark, all in exchange for a
fee, the relationship is a franchise.
4. Assistance in the form of training, guidance
about management, marketing and personnel, the grant of an exclusive
territory, restrictions on operating hours, all may indicate the
presence of a marketing plan.
5. An agreement that imposes procedures or
techniques that are customarily observed in the particular business is
not a marketing plan for purposes of the franchise law.
6. It is possible for a company to be deemed to
have operated in substantial association with a franchisor's
trademark, even if the trademark is not presented to customers.
7. Royalties, rents, payments for training,
advertising or supplies, or the wholesale purchase of inventory for
resale at bona fide wholesale prices, are all examples of charges that
may be a franchise fee.
8. Under the FTC franchise rule, the franchise
fee element is satisfied by required payments from the franchisee to
the franchisor totaling $500 or more up until the time the franchisee
has operated the business for six months.
9. Franchisors selling a franchise in a state
that has its own franchise law must comply with both the federal and
state franchise laws.
10. Before a franchisor can offer or sell a
franchise, the franchise must be registered with the Federal Trade
11. Franchise laws seek to provide pre-sale
disclosure to prospective franchisees so they can make informed
decisions about whether to invest.
12. The presale disclosures that a franchisor
must make are limited to the franchisor's history, the background of
its officers and how much money a franchisee can make.
13. California requires franchisors to register
with the state before making any offer or sale of a franchise in this
14. After registering with the state once, a
franchisor may offer and sell franchises perpetually, for as long as
it continues to act as a franchisor.
15. All franchisors who offer or sell franchises
in the state must register regardless of their size or experience.
16. California's franchise laws apply during
the sale process and also at the termination or nonrenewal of a
17. The Franchise Relations Act gives heirs of a
deceased franchisee an opportunity to participate in ownership of a
18. Referring to a business relationship as a
"license" avoids the need to comply with the franchise laws.
19. It is not necessary to comply with the
franchise investment law or franchise relations act if the franchisee
signs a knowing waiver of the law before a notary public.
There is no private right of action against a franchisor for violating
the FTC Franchise Rule.