The first half of 2017 brought the United States a new presidential administration and a number of changes to state franchising regulations. While Florida has rejected new franchise legislation, multiple states are amending existing franchising laws, including Illinois, Georgia and Indiana.
The Food and Drug Administration (FDA) recently announced that it will delay enforcing its new menu labelling regulations. The FDA issued an interim final rule to extend the compliance date from May 2017 to May 2018. As currently drafted, the menu regulations will require covered food establishments to provide caloric information on specified menus in a particular manner, as outlined in the law.
The North American Securities Administration (NASAA) recently issued the final draft of its new financial performance representations (FPR) commentary. NASAA issued the new FPR commentary because the Federal Trade Commission Franchise Rule permits a franchisor to disclose financial results in Item 19 of the franchise disclosure document, provided that it has a reasonable basis.
The Small Business Administration (SBA) has rolled out new regulations aimed at reducing administrative costs and the time spent approving franchise companies, while also decreasing the SBA's risk in relation to SBA-guaranteed loans to franchises. Under the new rules, lenders are required to determine whether a brand is a franchise under the Federal Trade Commission's amended Franchise Rule.
It is common for a franchisor to initiate litigation when a former franchisee uses the franchisor's confidential information or trade secrets or otherwise fails to return such information following the expiration or earlier termination of the franchise agreement. As one case makes clear, franchisors in Texas must pursue any tort claims relating to a franchisee's improper use of the franchisor's trade secrets or confidential information under the Texas Uniform Trade Secrets Act.
The North American Securities Administrators Association Inc (NASAA) recently issued a notice of request seeking public comment on a proposed financial performance representations (FPR) commentary regarding franchise disclosures. According to NASAA's notice of request, the proposed FPR commentary seeks to address various questions raised by franchisor representatives and state franchise examiners regarding FPRs.
In 2015 the National Labour Relations Board restated the standard for finding joint employment, holding that indirect control or the reserved right to control may be sufficient to find a joint employer relationship. A franchisor should take steps to minimise both the risk of being declared a joint employer of its franchisees' employees and the risk of a finding of common law vicarious liability for a franchisee's employment practices in most US states.
Two state laws govern franchising in California: the California Franchise Investment Law, which governs the offer and sale of franchises in California; and the California Franchise Relations Act, which governs the termination and non-renewal of franchises. Both laws are in flux: pro-franchisee amendments to the act were passed in late 2015 and pro-franchisor amendments to the law are pending.