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Zimmerman's Research Guide


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Franchises

A franchise is an agreement where one business (e.g., General Motors) licenses the right to use it name and/or to sell its products to another business (e.g., your local auto dealership).

Federal law requires franchises to provide disclosure statements to potential buyers (16 CFR 436.1 et seq.). The Federal Trade Commission oversees the law. The FCC-approved disclosure statement is called a "Franchise Disclosure Document" or FDD, and the company's Franchise Agreement must be attached as Exhibit A. The FDD format became mandatory on July 1, 2008. Before then, the common format was the "Uniform Franchise Offering Circular" (UFOC) drafted by the North American Securities Administrators Association. Canadian franchise file a "Canadian Disclosure Document."

There is no requirement that Franchise Disclosure Documents (FDDs) be filed with the Federal government. However, several states require franchise filings, including California, Hawaii, Illinois, Indiana, Maryland, Michigan (notice only), Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. You may be able to get copies by contacting the relevant state agency (see the FTC's list of State Offices Administering Franchise Disclosure Laws) or by contacting one of the specialized document retrieval services, such as Franchise-Insider.com; FRANdata; and FranchiseHelp. If the franchise is registered in California, you can search the free Cal-EASI database, which includes PDFs of filed documents.

In some cases, an FDD may be posted on the franchisor's web site.

The IFA International Franchise Association's Find a Franchise database provides contact information and basic information about the business (year started, # of franchises, etc.).

Compilations of Franchising Laws: The relevant Federal and state laws and regulations are compiled, with explanations, plus forms and lots of U.S. agency materials, in the CCH Business Franchise Guide and Matthew Bender's Franchising. The CCH is available as a looseleaf, a CD-ROM, on Lexis (CCH;CCHTRD) and on CCH's subscription-based Intelliconnect. The Bender is published as a looseleaf, as a CD-ROM and on Lexis (2NDARY;FRANNG). For a more affordable alternative, consider the Franchise Desk Book: Selected State Laws, Commentary and Annotations (ABA).

Directories: The venerable directory of franchises was Bond's Franchise Guide (Source Media), which was last published in 2009 (20th ed.). Bond's is a good place to get historical information on franchises. For current information, see the Franchise Directory on Source Media's WorldFranchise website.

Forms:Some franchising forms are available in the "Franchising" section of Eckstrom's Licensing in Foreign and Domestic Operations - Forms, which is available in print (from West) and on Westlaw (ECKLICNFO-FRAN).

Rankings and Surveys: Franchise Times compiles an annual list of the 200 largest franchises ranked by sales. Franchise owner satisfaction surveys are available from Franchise Research Institute and Franchise Business Review.

Treatises: Franchising treatises include Franchising Law: Practice and Forms (Specialty Technical Publishers) and Franchising (LexisNexis/Matthew Bender). Aspen Publishers has a series of books on International Franchising in Industrialized Markets and International Franchising in Emerging Markets.

You can find a general discussion of franchising laws in American Jurisprudence 2d. You can find a discussion of the franchising laws for a particular state in the relevant state's legal encyclopedia (e.g., California Jurisprudence or the Maryland Law Encyclopedia).


See Also
Company Information
Federal Trade Commission

For comments, questions and suggestions, email the author
Copyright 2014 Andrew Zimmerman