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News Briefs
Weak Economy Changes Franchisors' Legal Equation
Nearly every economic outlook for the U.S. economy suggests that the recovery from the recession will be slow and inconsistent. Credit remains tight, unemployment remains high, and consumers are spending cautiously. An industry as widespread as franchising reflects the macro trends that have engulfed the economy generally.
With that macro picture in mind, Darrell Johnson, CEO of FRANData Corp., provided a measured, but not negative, outlook for the franchise industry in his presentation, “2011 Economic Forecast for Franchising” at the Franchise Leadership and Development Conference, sponsored by Franchise Update. Johnson said that the credit squeeze and tough economic times have tied together the fortunes of franchisor and franchisee more closely than ever before, and this has implications for how franchisors' operations and legal teams must work together.
“Because of all the litigation and case law in the last 10 or 15 years, the legal community has rightly said to franchisors [that] in order to protect yourselves, you can't do this, you can do that, you need to stay away from that, you can't say that. But we know that the tide has gone out from an operational standpoint for franchisees,” said Johnson. “There are things that you [franchisors] know that you could do to help your franchisees, but you can't from a legal standpoint. It's a roadblock that has to be resolved.”
Johnson said that he is starting to see franchisors “challenge the legal community to find ways to ' effectively help franchisees in ways you know will work. This is not only on the front end in attracting franchisees and finding financing, but also in supporting them over time.”
As an example, Johnson said that banks are considering the attractiveness and strength of entire franchise systems when deciding whether to extend credit to a prospective or operating franchise unit. “It's not just about the individual borrower,” he said. “The preferred-lender model isn't there anymore.” Given this scrutiny, franchisors need to support struggling franchisees because a failure of a franchise unit will be a mark against the system that will make it more difficult for all other franchisees to get credit, Johnson said. Also, since community banks are receiving a large share of federal support for the banking system (including the $30-billion Small Business Lending Fund created this fall), franchisors will need to explain franchising to bankers who are probably unfamiliar with the industry.
Johnson also pointed out that franchisors' co-branding ventures and the desire by multi-unit franchise operators to operate different franchise brands as a way to protect themselves if one franchise system does poorly are raising the complexity of franchise operations and contractual issues.
Revised Proposed Business Opportunity Rule Published for Comment
In October, the Federal Trade Commission (“FTC”) published a report that proposes amendments to the Interim Business Opportunity Rule that was published in 2006. The new rule, referenced as the Revised Proposed Business Opportunity Rule (“RPBOR”), would include a Revised Proposed Disclosure Document to streamline the amount of information that sellers of business opportunities would have to provide to prospective buyers, remove multi-level marketing programs from coverage under the rule, and extend the rule to cover sellers of at-home businesses. Public comments on the rule are due on Jan. 18, 2011.
The RPBOR would retain the proposal from the interim rule for an exemption from the business opportunity rule for any business that is covered by the Franchise Rule, while leaving as ineligible for the exemption businesses that are exempt from the Franchise Rule due to factors such as being fractional franchises or not charging franchise fees.
Adoption of the RPBOR would continue the divorce of business opportunity regulation from franchise regulation that began in 1995 when the Original Franchise Rule underwent regulatory review, while maintaining the FTC's mission to protect consumers from fraudulent business opportunity sales activities. “The Commission's law enforcement experience in conducting numerous sweeps of the business opportunity industry demonstrated that fraud in the sale of business opportunities is not only prevalent but persistent,” the Commission wrote in its report.
To read the report, go to www.ftc.gov/os/fedreg/2010/october/101028businessopportunitiesstaffreport.pdf.
Weak Economy Changes Franchisors' Legal Equation
Nearly every economic outlook for the U.S. economy suggests that the recovery from the recession will be slow and inconsistent. Credit remains tight, unemployment remains high, and consumers are spending cautiously. An industry as widespread as franchising reflects the macro trends that have engulfed the economy generally.
With that macro picture in mind, Darrell Johnson, CEO of FRANData Corp., provided a measured, but not negative, outlook for the franchise industry in his presentation, “2011 Economic Forecast for Franchising” at the Franchise Leadership and Development Conference, sponsored by Franchise Update. Johnson said that the credit squeeze and tough economic times have tied together the fortunes of franchisor and franchisee more closely than ever before, and this has implications for how franchisors' operations and legal teams must work together.
“Because of all the litigation and case law in the last 10 or 15 years, the legal community has rightly said to franchisors [that] in order to protect yourselves, you can't do this, you can do that, you need to stay away from that, you can't say that. But we know that the tide has gone out from an operational standpoint for franchisees,” said Johnson. “There are things that you [franchisors] know that you could do to help your franchisees, but you can't from a legal standpoint. It's a roadblock that has to be resolved.”
Johnson said that he is starting to see franchisors “challenge the legal community to find ways to ' effectively help franchisees in ways you know will work. This is not only on the front end in attracting franchisees and finding financing, but also in supporting them over time.”
As an example, Johnson said that banks are considering the attractiveness and strength of entire franchise systems when deciding whether to extend credit to a prospective or operating franchise unit. “It's not just about the individual borrower,” he said. “The preferred-lender model isn't there anymore.” Given this scrutiny, franchisors need to support struggling franchisees because a failure of a franchise unit will be a mark against the system that will make it more difficult for all other franchisees to get credit, Johnson said. Also, since community banks are receiving a large share of federal support for the banking system (including the $30-billion Small Business Lending Fund created this fall), franchisors will need to explain franchising to bankers who are probably unfamiliar with the industry.
Johnson also pointed out that franchisors' co-branding ventures and the desire by multi-unit franchise operators to operate different franchise brands as a way to protect themselves if one franchise system does poorly are raising the complexity of franchise operations and contractual issues.
Revised Proposed Business Opportunity Rule Published for Comment
In October, the Federal Trade Commission (“FTC”) published a report that proposes amendments to the Interim Business Opportunity Rule that was published in 2006. The new rule, referenced as the Revised Proposed Business Opportunity Rule (“RPBOR”), would include a Revised Proposed Disclosure Document to streamline the amount of information that sellers of business opportunities would have to provide to prospective buyers, remove multi-level marketing programs from coverage under the rule, and extend the rule to cover sellers of at-home businesses. Public comments on the rule are due on Jan. 18, 2011.
The RPBOR would retain the proposal from the interim rule for an exemption from the business opportunity rule for any business that is covered by the Franchise Rule, while leaving as ineligible for the exemption businesses that are exempt from the Franchise Rule due to factors such as being fractional franchises or not charging franchise fees.
Adoption of the RPBOR would continue the divorce of business opportunity regulation from franchise regulation that began in 1995 when the Original Franchise Rule underwent regulatory review, while maintaining the FTC's mission to protect consumers from fraudulent business opportunity sales activities. “The Commission's law enforcement experience in conducting numerous sweeps of the business opportunity industry demonstrated that fraud in the sale of business opportunities is not only prevalent but persistent,” the Commission wrote in its report.
To read the report, go to www.ftc.gov/os/fedreg/2010/october/101028businessopportunitiesstaffreport.pdf.
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.
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.
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.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
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?