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Exemptions and Prohibitions in the New Franchise Rule
The New Franchise Rule deletes the four exclusions in the existing Rule for employer-employees and general partnerships, cooperative organizations, testing or certification services, and single trademark licenses, since a revised definition of 'franchise' in the Rule obviates the need for these exclusions. The New Rule retains the exemption for franchise sales under $500, fractional franchises, and leased departments, while adding an exemption for petroleum marketers governed by the Petroleum Marketing Practices Act, as well as for three categories of 'sophisticated investor.'
The 'sophisticated investor' exemptions eliminate disclosure obligations to persons who can, it is assumed, take care of themselves without government assistance. The first exemption applies to a franchise where a large investment is required. Exempt are transactions in which the prospective franchisee makes an initial investment of at least $1 million, excluding the cost of unimproved land and funds provided by the franchisor or its affiliates. The total initial investment in a multi-unit franchise is used in determining the required amount. The franchisee must sign
an acknowledgment certifying the investment will exceed $1 million and that the franchisee is aware of the Rule and knows that making an investment in that amount and signing the acknowledgment exempts the transaction from the Rule. If a franchisee-entity has more than one investor, the exemption will apply only if at least one individual invests more than $1 million in the project. A group of investors contributing less than $1 million each does not satisfy the exemption's requirements. If a conversion franchise is involved, the initial investment in the unit or units being converted can satisfy the $1 million threshold. For a franchise transfer, the amount of the sale is used to determine the investment for purposes of the exemption.
Another exemption exists under the New Rule for sales to large franchisee entities. This exemption depends both on a prospective franchisee's prior experience and net worth. The prospective franchisee must have a net worth of at least $5 million and have been in business, any business, for at least five years. To qualify, the franchisee entity ' an individual can be an 'entity' under this exemption ' can consider the prior experience and net worth of its parent and affiliates. One assumes that if the 'entity' is an individual, the net worth and business experience of his or her natural parents do not qualify in determining the applicability of the exemption. The final sophisticated investor exemption removes from the New Rule sales to persons who own a majority interest in a franchise if they have been officers, owners, or managers of the business being franchised for at least two years prior to the sale and were so at least 60 days prior to the sale. This 'insiders' exemption applies only to a franchise of the company for which the concerned purchasers work. It does not apply to officers, owners, or managers of any other business, even if that business is similar to that being franchised.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?