Franchise Registration State
Relevant Registration Entity:
California Department of Corporations
California Statutes that Apply to Franchising:
Franchise Filing State
Relevant State Franchise Law(s):
The Florida Franchise Act. Also refer to the FTC Franchise Rule.
Relevant Registration Entity:
Florida Department of Revenue
Florida Franchise Act:
Statute 686.201 - Sales representative contracts involving commissions; requirements; termination of agreement; civil remedies;
Statute 686.30 - Contract agreements for repair parts fro motor vehicles and trucks; termination must be done in good faith; definition of good cause; prohibited practices; failure to pay sum specified on cancellation of contract; liability
Statute 686.40 - Agricultural Equipment Manufacturers and Dealers Act
Statute 686.401 - Legislative finding and intent; construction of ss. 686.40-686.418
Statute 686.402 - Definitions of terms used in ss. 686.40-686.418
Statute 686.403 - Application of ss. 686.40-686.418
Statute 686.405 - Warranty agreements; claims; compensation of dealers
Statute 686.406 - Parts; availability; return
Statute 686.407 - Repurchase of inventory upon termination of franchise agreement; establishment
or relocation of dealership; sale or lease of new equipment
Statute 686.408 - Repurchase of inventory upon death or incapacity of dealer
Statute 686-409 - Compensation for inventory upon refusal to renew, termination of, or restriction on transfer of a franchise
Statute 686-41 - Indemnification of dealer with respect to legal actions
Statute 686.413 - Unlawful acts and practices
Statute 686.415 - Unenforceable contract or franchise agreement
Statute 686.417 - Remedies
Statute 686.418 - Effect of act on other remedies
Statute 686.501 - Definitions; ss. 686.501-686.506
Statute 686.502 - Cosignment relationship; notice; proceeds of sales held in trust; contract requirements
Statute 686.503 - Contract provisions
Statute 686.504 - Warranties by art dealers; written statement; terminology
Statute 686.505 - Construction of language
Statute 686.506 - Rights and liabilities, additional; merchant's liability
Statute 686.60 - Short title
Statute 686.601 - Legislative finding and intent; construction
Statute 686.602 - Definitions of terms used in ss. 686.601 - 686.614
Statute 686.603 - Application
Statute 686.604 - Warranty agreements; claims; compensation of dealers
Statute 686.605 - Parts; availability; return
Statute 686.606 - Repurchase of inventory upon termination of dealer agreement
Statute 686.607 - Repurchase of inventory upon dealth or incapacity of dealer;
Statute 686.608 - Compensation for inventory upon refusal to renew, ermination of, or restriction on transfer of a dealr agreement
Statute 686.609 - Idemnification of dealer with respect to legal actions
Statute 686.611 - Unlawful acts and practices
Statute 686.612 - Unenforceable contract or agreement
Statute 686.613 - Remedies
Statute 686.614 - Effect on act on other remedies
Statute 686.701 - Reimbursement of federal excise tax on motor fuel
In 2010 two trends have become abundantly clear: With the ever accelerating "shift" in the United States economy a substantial number of successful business owners and qualified individuals have and continue to consider and explore"franchising" as an avenue for growth and income stability. That is, (1) successful business owners are considering the prospects and benefits of "franchising their business and becoming a franchisor" and (2) certain exceptionally qualified individuals are evaluating the prospect of "buying a franchise and becoming a franchisee" as a potential opportunity for income stability and growth.
The interesting thing about these "trends" is that they do not relate to and are not evidenced by franchise system development or franchise unit sales (in fact these "metrics" are, markedly, down with declining growth levels) but, rather, the "intensity levels" by which certain "exceptionally qualified" individuals and business owners have and continue to - for the first time - seriously consider the "franchising business model" . Faced with economic declines and economic uncertainty comes, what I believe to be, an exceptional "filtering process" and opportunity whereby a select number of exceptional prospective franchisees and franchisors will be presented with the economic incentive to create successful franchise relationships and, quite possibly, help redefine the franchisor/ franchisee relationship.
So, for both prospective franchisors and franchisees, my advice for 2012 is to evaluate opportunities thoroughly, understand that franchising is not right for everyone (in fact it is not right for "most" business owners and individuals), and, recognize that for a select few - who get it right - with our current state of economic uncertainty also exists a substantial opportunity for growth through franchising. However this "opportunity" requires precise planning and commitment - do not rush into the purchase of a franchise or the development of a franchise system.
Many times, "start-up" franchisors (and, too often, some established franchisors) overlook the necessity of maintaining a thorough operations manual that is both "current and relevant" to the particular franchise system. That is, many times operations manuals are viewed as an "afterthought" or a"generic" obligation to be sourced out to third party vendors.
Much more than a "generic resource", your operations manual must be drafted, updated and maintained as an integrated extension of your franchise agreement and FDD disclosures. Recognizing the critical importance of a properly prepared and integrated operations manual, startup and established franchisors should consider the following:
- Franchise agreements are typically drafted and structured to integrate and obligate franchisees to abide by both current "and future" operational requirements set forth in the operations manual. If the franchise agreement is drafted properly, the operations manual should create "contractual flexability", allowing the franchisor to modify elements of the franchise system through amendments and supplements to the operations manual.
- Your operations manual must serve as a thorough blueprint to provide franchisees with detailed "how to" information respecting each and every administrative and operational element of the franchise system.
Examples of "administrative obligations" include (a) the franchisees royalty and financial reporting obligations, (b) franchisees financial record retention obligations, and (c) system requirements for point of sale systems.
Examples of "operational obligations" include (a) franchisees obligations respecting the management of the franchise business, (b) requirements for management and control of inventory and supplies, (c) building and construction plans and specifications, (d) training programs and obligations, and (e) operational elements respecting the day-today management and operation of the franchised business.
- The preparation of your operations manual cannot be a task that you simply "outsource". While it is prudent to obtain the advice and input of a qualified consultant (including your franchise attorney), the operations manual must directly reflect and embody "your" direct understanding and knowledge about the franchised business. "You" must be the primary contributor and driving force behind the preparation and development of your operations manual.
- Your operations manual must be consistent with your franchise agreement and FDD. Review with your franchise lawyer the content of your operations manual to ensure that there is consistency with your franchise agreement. Ensure that your training programs are extensively identified in the operations manual and properly disclosed.
- Your operations manual should be constantly updated, refined and clarified to reflect the constant and continuous evolution and growth of your franchise system.
Your operations manual is critically important to the long-term success of your franchise - treat it as such.
The definition of a franchise and the factors utilized to evaluate the existence of a franchise have important implications. That is, does the business arrangement providing for the multi-unit expansion of your business qualify as a franchise and thereby subject you to franchise regulations and disclosure requirements? The answer to this question depends on the "substance" of the business relationship and an evaluation of both federal and state law.
For the "New York franchisor" (comprised of any business - based in any state - seeking to offer or sell a franchise in the State of New York) the definition of what constitutes a "franchise" is more expansive that the federal definition. Under the Federal Franchise Rule "trademarks" and "trademark licenses" are primary and critical components of a franchise system. Without the license of a trademark, under federal law, a "franchise" does not exist. Under New York law however, the existence of a franchise is not dependent upon the existence of a trademark license. That is, although your "business arrangement" does not involve a trademark license and therefore does not qualify as a "franchise" under federal law, you may nevertheless be subject to New York's franchise regulations and disclosure requirements if your "business arrangement" is based on a written or oral agreement providing for:
- (i) A Proscribed Marketing Plan or System: The offer, sale or distribution of goods or services under a proscribed marketing plan or system; and
- (ii) Payment of a Franchise Fee: The direct or indirect payment of a "franchise fee". What qualifies as a "franchise fee" is also expansively defined and may include license fees and other charges associated with the business transaction.
Additionally, New York offers an alternative definition of a franchise replacing the "proscribed marketing plan" requirement (point (i) , above) with a "trademark license".
So, under New York law, unlike federal law, although the existence of a "trademark license" may give rise to a "franchise relationship" it is not mandatory. In the State of New York franchises and franchise relationships are not dependent upon the existence of trademarks and trademark licenses.