The Risks and Exposures Associated with Franchise Noncompliance
M. Stuart Sutherland, 42(2): 369–97 (Feb. 1987)
Prospective franchisors seeking to create a franchise system for the expansion of their businesses sometimes balk at the expense and difficulty of complying with federal and state franchise regulations and statutes. This Article examines the risks to the prospective franchisor who adopts a noncompliance strategy and concludes that such risks are too great to support any justification for noncompliance.
Franchise Relationship Laws: A Minefield for Franchisors
Thomas M. Pitegoff, 45(1): 289–331 (Nov. 1989)
Several states have laws that limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of such agreements. This Article provides an overview of the state franchise relationship laws, showing that these laws are surprisingly lacking in uniformity, and concludes by questioning whether there is a continuing need for these laws.
Do Franchisors Owe a Duty of Competence?
Robert T. Joseph, 46(2): 471–505 (Feb. 1991)
Franchisees can be vulnerable to the risks of franchisor incompetence. This Article explores the legal theories that may be available to a franchisee because of the franchisor's failure to meet the franchisee's reasonable expectation of franchisor performance. It examines whether there should be a cause of action in tort for a franchisor's failure to exercise due care, resulting in economic loss to the franchisee; the potential applicability of the implied covenant of good faith and fair dealing to instances of franchisor incompetence; and ways in which contract theories (other than the breach of the implied covenant) may be used to attack deficient franchisor conduct.
Implied Obligations in Franchising: Beyond Terminations
Lee A. Rau, 47(3): 1053–81 (May 1992)
The courts have used a number of different legal theories and doctrines to protect franchisees from a loss of their investment as a result of arbitrary or unreasonable action by their franchisor. This Article reviews the rise and fall of efforts to impose fiduciary duties on franchisors and the emergence of the implied obligation of good faith and fair dealing as the principle judicial constraint on franchisor arbitrariness. It then reviews the application of the good faith and fair dealing obligation to a number of different situations that typically arise in the franchising context and urges that the courts give considerable deference to the honest business judgment of franchisors in the interests of the efficient distribution of goods and services.
State Franchise Laws and The Small Business Franchise Act of 1999: Barriers to Efficient Distribution
Thomas J. Collin, 55(4): 1699–1761 (Aug. 2000)
This Article looks at how state franchise laws have been applied to manufacturers. Because of definitional overbreadth, the laws have been applied to conventional supplier-reseller relationships, not just traditional franchises, to override bargained-for promises in distribution agreements, such as termination at will. The Article also looks at the Small Business Franchise Act of 1999, pending in Congress, and considers its potential effect on product distribution by manufacturers. In contrast to federal antitrust policy, which favors competition and promotion of consumer welfare, state franchise laws have been applied to protect underperforming dealers and distributors or limit efficiency-enhancing distribution changes by manufacturers, and the Small Business Franchise Act of 1999 could be expected to have the same application. These laws pose significant obstacles to manufacturers seeking to adapt distribution systems to the demands of e-commerce and globalization of the economy.