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Living in the Shadow of National Survival Game

By George J. Eydt
December 20, 2011

On Nov. 14, 1988, the Honorable Gerald E. Delaney of the N.Y. Supreme Court, Westchester County, released a decision that limited the utility of the New York Franchise Law's isolated sales exemption. His decision in The National Survival Game of New York, Inc. v. NSG of LI Corp. (200 N.Y.L.J. No. 93, p. 27; CCH Business Franchise Guide ' 9294, at 19,622) remains the law in New York. But did Justice Delaney get it right?

Franchise sales in the United States are regulated by both federal and state law. The federal FTC Franchise Rule requires franchisors to provide prospective franchisees with a copy of a disclosure document before taking any money or signing any agreement. Fifteen states also regulate the sale of franchises, and some of these states have both a registration requirement and their own disclosure document requirement. New York is one of these states. But the franchise statute in New York, as well as Indiana, Minnesota, and Washington, provides an exception for isolated franchise sales.

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