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Summer 2020 - Volume 40, Number 1



Managing the Proliferation of Global Franchise Regulation

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.

Stradivarius Revisited: Re-Tuning Your Franchise Arbitration Instrument

Franchising has had a long and fitful struggle with arbitration. When the California legislature passed the firstfranchise law in the country in 1971, it prohibited theuse of arbitration clauses in franchise agreements. Soonafter, the U.S. Supreme Court struck down this protective statute as preempted by the Federal ArbitrationAct (FAA).1 This tension between protecting franchiseesfrom unfair arbitration proceedings and the FAA canbe traced like a fault line through decades of franchiselitigation.

From the Editor-in-Chief