Momentum Builds for New York To Revamp Its Franchise Law

Vol. 17 No. 1

By

Thomas M. Pitegoff, LeclairRyan

This just may be the year when New York changes its franchise law. The New York State Bar Association (NYSBA) voted in November 2013 to make franchise law reform one of its priorities for the 2014 legislative session. The proposed changes are geared not only toward conforming New York’s law to the Federal Trade Commission’s franchise regulation, but also toward eliminating provisions that discourage franchisors from locating their headquarters in New York.

The NYSBA’s Executive Committee approved the proposed changes to the New York Franchise Act (NYFA), GBL Art. 33, §§ 680-695, in January 2010. These changes were backed by the association’s sections of Business Law, International Law, and Intellectual Property Law. Editor’s Note: The author of this article chaired the subcommittee that authored the proposed changes. Copies of the subcommittee’s report and the proposed changes are available on the NYSBA website at www.nysba.org/BLSlegislative.

Since its enactment in 1981, the NYFA has differed from franchise registration and disclosure laws in other states. The statute has its peculiarities, like its reference to a “prospectus” rather than an offering circular or a disclosure document. But more importantly, the statute creates uncertainties and traps for the unwary through unique features such as its overly broad definition of a franchise and its overly broad application to international franchise sales. These aspects of the law pose impediments to doing business in the state, while serving little or no purpose.

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