Franchise Law

Business owners who bought into a franchise often wonder, “Can I sell my business?” In short, yes, you can. The Minnesota Franchise Act specifically entitles you to sell your business. This cannot be overruled by your franchise agreement. You may have to pay a reasonable transfer fee. Can a Minnesota Franchise Be Sold? Yes. The sale…

Three Elements of Operating a Franchise in Minnesota Operating a franchise involves the combination of these three elements: A license to use a trade or service mark, The payment of a fee by the franchisee to the franchise for the right to enter a business, and Community interest’s, marketing plan or some element of control…

Remedies for Violations of Minnesota Franchise Act Under the Minnesota Franchise Act (MFA) there is a private right of action for franchisees, and anyone who violates the MFA is liable to the franchisee. There are a number of different ways the franchisee can sue for violations through the MFA, including damages, recision, or other relief….

Privacy torts were not recognized until the 1998 case, Lake v. Walmart Stores. The Lake decision finally recognized the privacy torts of appropriation, intrusion upon seclusion, and public disclosure. However, Chief Justice Blatz noted: We decline to recognize the tort of false light publically at this time. We are concerned that claims under false light…

Sample Franchise Disclosure Document Does failure to provide mandated disclosure documents vitiate a subsequent franchise agreement? Yes. Under Minnesota law, a franchisee is entitled to rescind the franchise agreement if he or she chooses to do so. Federal Law Regulating the Sale of Franchises There are both federal and state laws that regulate the sale…

Related disclosure document posts: Franchise Rule Disclosure Compliance Obligations Ways of Furnishing Disclosure Documents Sample Franchise Agreement / Disclosure Document When Must Disclosure Documents Be Furnished? Does failure to provide mandated disclosure documents prior to the entering into a franchise agreement vitiate the subsequent agreement? Federal Laws Regarding the Sale of Franchises Both federal and…

A Ticking Time-Bomb: the Accidental Franchise Could your license agreement actually be considered a franchise agreement? A license agreement that qualifies as a franchise agreement can have devastating effects on your business venture. In short, everyone you have done business with is entitled to rescind their transaction and you could face potential felony charges. The…

As a franchise attorney, I have seen the work of a number of franchise attorneys. If I were to have a conflict of interest and had to refer a franchisor or franchisee to another franchise attorney, a few local franchise attorneys stand out in my mind. These franchise attorneys understand franchise law well and would…

Franchise Law in Minnesota is governed by the Minnesota Franchise Act set out in Minnesota Statutes § 80C. A franchise is established when a franchisor (person selling or offering to sell a franchise) allows a franchisee (person given the rights to operate franchise) to operate a business using the franchisor’s trade name, logo, advertising, symbols,…

This article explains requirements for a franchisor starting a franchise in Minnesota. If you buying a franchise, visit tips on buying a franchise in Minnesota. Item 23: Receipts Like the UFOC Guidelines, the amended Rule requires franchisors to obtain a signed receipt for the disclosure document furnished to each prospective franchisee. To facilitate electronic disclosures, the definition…

Additional Prohibitions In addition to the prohibitions concerning the making of financial performance representations, discussed above, the amended Rule prohibits seven specific acts or practices. Each of the seven is discussed immediately below. Prohibition Against Contradictory Information The amended Rule prohibits a franchise seller from making any statement that contradicts the information disclosed in the…

Item 18: Public Figures Item 18 of the amended Rule requires the disclosure of certain information about a public figure’s involvement in the franchise system. This covers public figures who lend their name or image to the franchise, control or manage the franchisor, or invest in the franchisor. Who Qualifies as a “Public Figure”? A…

Apportionment is a key feature of state corporate taxes Apportionment formulas are important features of state corporate income taxes. They determine how much of a business’s income is taxable and affect the incidence and competitiveness of the tax. Minnesota apportions corporate income using the Minnesota proportions of the corporation’s sales, payroll, and property factors to…

Definition of Franchising Franchising is a method of marketing and distributing goods and services. Franchises are offered and sold for many types of businesses, including services, retail trade, finance, real estate, transportation, and communications. A franchise is broadly defined as a contract or agreement between two or more persons by which the franchisor (the seller),…

Franchise Disclosure Document Belmont Mufflers, Inc. A Minnesota Corporation 111 First Street Jackson, Minnesota 55000 (111) 222-3333 franchiseofficer@belmont_mufflers4u.com www.belmont_mufflers4u.com Belmont Mufflers, Inc., repairs and installs motor vehicle exhaust systems. The total investment necessary to begin operation of a Belmont Mufflers franchise is $100,000. This includes $42,000 that must be paid to the franchisor or affiliate….

The “Required Payment” Element The last of the three definitional elements of a franchise covered by the amended Rule is that purchasers of the business arrangement must be required to pay to the franchisor (or to an affiliate), as a condition of obtaining a franchise or starting operations, a sum of at least $500 at-5…

Isolated Sales and Limited Offerings Sales by a nonissuer of securities to no more than ten purchasers in Minnesota during any period of twelve consecutive months are exempt from registration as are nonissuer transactions by or through a broker dealer where the security has been in the hands of the public for at least 90…

Sample Item 15-1: Obligation to Participate in the Actual Operation of the Franchise Business ITEM 15: OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS.  If you are an individual, you must directly supervise the franchised business on its premises. If you are a corporation, a person who owns at least a 1/3…

A company selling securities to residents of the state of Minnesota must comply with federal and state securities laws. State securities laws are collectively and individually referred to as “Blue Sky Laws.” These Blue Sky Laws vary among the states, sometimes to a significant degree. It is important to note that the Minnesota Legislature recently…

Reasonableness of a Financial Performance Representation The amended Rule prohibits franchise sellers from making any financial performance representation unless they have a reasonable basis for the representation at the time the representation is made. Written factual information in the seller’s possession must reasonably support the representation, as it is likely to be understood by a…

Financial Performance Representations The amended Rule prohibits financial performance representations that are not true or are not substantiated at the time they are made. It is important to note that these prohibitions cover not only the franchisor, but any “franchise seller.” The amended Rule defines the term “franchise seller” as follows: A person that offers…

Instructions for Preparing Disclosure Documents The Rule specifies how the disclosures are to be prepared, what additional information may and may not be included, and what records franchisors must maintain. Use of “Plain English” The amended Rule requires franchisors to disclose all specified, material information clearly, legibly, and concisely in a single document using plain…

Item 19: Financial Performance Representations Like the original Rule and the UFOC Guidelines, the amended Rule permits, but does not require, franchisors to include representations about financial performance in their disclosure documents.16 Unlike the original Rule, a franchisor that decides to make such representations must include them in Item 19, not in a separate document….

Item 15: Obligation to Participate in the Actual Operation of the Franchise Business Item 15 of the amended Rule requires franchisors to disclose whether franchisees are required to participate personally in the direct operation of the franchise. Among other things, the amended Rule’s Item 15 calls for disclosures stating: any obligation for the franchisee to…

Item 11: Franchisor’s Assistance, Advertising, Computer Systems, and Training Consistent with the UFOC Guidelines, Item 11 of the amended Rule requires the disclosure of the franchisor’s obligations under the franchise agreement to furnish assistance to franchisees. The disclosure requirements encompass pre-opening assistance (e.g., site selection), as well as any ongoing assistance, such as advertising and…

Item 5: Initial Fees Consistent with the UFOC Guidelines, Item 5 of the amended Rule requires the disclosure of any initial fees and any conditions on their refundability. “Initial fees” means “all fees and payments, or commitments to pay, for services or goods received from the franchisor or any affiliate before the franchisee’s business opens,…

Item 3: Litigation Item 3 calls for the disclosure of certain lawsuits involving the franchisor and other entities associated with the franchisor – i.e., predecessors, parents, and affiliates – in addition to certain lawsuits involving any person identified in Item 2. These are substantially similar to the disclosure requirements of the original Rule and the…

Item 1: The Franchisor And Any Parents, Predecessors, And Affiliates Item 1 of the amended Rule requires franchisors to disclose background information on the franchisor and any parents, predecessors, and affiliates. Unlike the UFOC Guidelines instructions for Item 1, the amended Rule does not expressly require a franchisor to refer to itself as “we,” or…