Managing the Proliferation of Global Franchise Regulation
Ann Hurwitz
I began practicing franchise law more than thirty-five
years ago. Franchise regulation was then in its infancy.
California had enacted its Franchise Investment Law1
in 1970, adopting a regulatory regime similar to securities law; that is, registration of the franchise offering
with the state and required disclosure to the prospective
purchaser. The U.S. Federal Trade Commission (FTC)
soon followed with federal regulation, promulgating
the original FTC Franchise Rule2
(Original FTC Franchise Rule) in December 1978, with an effective date of October 21, 1979.
Applicable in all U.S. states and territories, the Original FTC Franchise
Rule mandated pre-sale disclosure, but did not require registration of the
franchise offering. In addition to California, a few other states (Registration
States)3
adopted franchise sales laws resembling the California Franchise
Investment Law model and requiring registration of the franchise offering
with the state, as well as disclosure to the prospective franchisee. A number
of U.S. states (Relationship States)4
also enacted laws, commonly referred to
as “relationship laws,” regulating certain aspects of the post-sale relationship
between the franchisor and the franchisee.