Articles

Franchise Sales Laws Need Revisions to Further Their Objectives, but Federal Preemption Is Not the Solution

A recent Franchise Law Journal article recommends transmogrifying all state and federal franchise sales laws into a unitary federal standard which would preempt all state laws (the Preemption Article).1 A central premise of the Preemption Article is the chorus of franchisors’ complaints of expensive and duplicative state franchise registration requirements. The Preemption Article concludes by recommending preempting federal legislation, including several new, and some useful, provisions: 1) establishing a national database for all franchise disclosure documents (FDDs); 2) deputizing state attorneys to enforce a new federal disclosure law; and 3) providing a federal cause of action under the new federal disclosure statute

Franchise Advertising in the Digital Age: Regulators Need to Contemporaneously Address Advancing Advertising Technologies or Step Aside

The states of California, Maryland, Minnesota, New York, North Dakota, Rhode Island, and Washington all regulate the “advertisement” of franchise sales.1 Though well intentioned, these regulations are dated and clumsy when applied to regulate advertising in the digital age. Today’s franchise marketing may involve “traditional” advertising, such as advertisement in franchise trade publications or in local or regional business publications; but more often, franchisors are utilizing the technologies of the twenty-first century, such as “Google Ads,” “Facebook Ads,” “re-marketing,” or “geo-fencing” or “geo-targeting.” As applied to digital advertising, the current state of franchise advertising regulations is archaic and antiquated . . . and frankly inapplicable in most situations. This article will examine the existing state advertising regulations and identify where they fall short in addressing today’s digital advertising methods. It will also discuss some of the most frequently used digital advertising methods.

The Anatomy of Lost-Profits Claims in Franchise Cases

Claims seeking the recovery of lost profits are becoming increasingly more common in franchise litigation, particularly after franchise termination. Because both the franchisor and the franchisee enter into the relationship with the expectation of profit, a termination frustrates both sides’ expectations and the economic rationale for entering the relationship in the first place. Although historically franchisees were more likely to assert these claims in reaction to terminations, more recently franchisors have also pursued such claims when franchisees leave the relationship before the end of the contract term.

Contactless Currency During COVID-19: How the Pandemic’s Business Disruptions Will Change Franchise System Payment Standards

As the COVID-19 pandemic rages on, the economic tollof this global crisis continues to take shape with upwardand downward spikes in activity, proving that the country’s financial forecast remains very much in flux. As hasbeen hashed out in seemingly countless articles since thepandemic firmly established itself by March 2020, smallbusinesses—those without the resources of their biggerchain rivals—have suffered greatly with revenues fallingand closures and layoffs continuing.

ASC 606 and Its Impact on the Franchise Industry

Revenue is a key component of all businesses, including franchisors, and itis important that counsel to franchisors have an understanding of the potential effects that accounting changes relating to revenue recognition can haveon a franchisor. An important change in the rules related to revenue recognition became effective in 2019 and 2020 due to the adoption of AccountingStandards Codification, “Revenue from Contracts with Customers” (Topic606)1 (ASC 606) by the Financial Accounting Standards Board2 (FASB) onMay 28, 2014.

From the Editor-in-Chief

From the Editor-in-Chief

One night when I was in high school, at the apex of my stupid years,1 I, along with a group of about twelve other guys, thought it would be a brilliant idea to play a game of tackle football in a local park, in the dark, at 2 am.2 You know, like most typical teenaged idiots. Someone spilled the beans on the plan, and a large group of girls decided to raid the game with water balloons. Childhood chaos ensued, and, predictably, some disgruntled neighbor called the cops, who showed up with four squad cars and a K-9 unit following up on reports of a gang war.3 When the megaphone blared out “freeze” and the squad-car floodlights lit up the field, we were all terrified we would get in trouble (i.e., grounded). But that’s about all that we worried about.