Franchise, Distribution and Licensing Law Committee Activity in
Review
As published in the NY Business Law Journal:
Winter 2012 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise, Distribution and Licensing Law Committee has been very
active this year. The Committee continues to pursue changes to the New
York Franchise Sales Act and its accompanying Regulations in order to
make the Act more business friendly and consistent with the Federal
Franchise Rule, which was amended in 2008. Recently, the Committee
invited Joseph Punturo, the Franchise Section Chief for the New York
Department of Law, to attend and present at its Committee meeting. Mr.
Punturo discussed the recently promulgated Trade Show Exemption under
Section 684(1) of the New York Franchise Act; procedures for applying
for exemptions under the New York Franchise Act, including discretionary
exemptions; and the Committee’s proposed amendments to the New
York Franchise Act and its accompanying Regulations in order to make the
Act more business friendly and consistent with the FTC Franchise Rule.
The Committee’s most recent meeting included a lively presentation
led by Stan Friedman, a Certified Franchise Expert and a principal with
an Atlanta-based franchise consulting fi rm. Mr. Friedman discussed the
role that outside counsel can and should play in helping its start-up
and emerging franchisor clients achieve sustainable growth. Mr. Friedman
shared real world experiences about the challenges that emerging
franchisors encounter when taking the leap from “start-up”
to “stay-up.” The Committee’s next meeting is
scheduled for January 23, 2013 in conjunction with the NYSBA’s
Annual Meeting.
- David W. Oppenheim, Chair
Summer 2012 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The committee has been very active. At its most recent meeting, in
January 2012, the committee heard from Mr. Joseph Punturo, the Franchise
Section Chief for the New York Department of Law, on the recently
promulgated Trade Show Exemption under Section 684(1) of the New York
Franchise Act and procedures for applying for exemptions under the New
York Franchise Act, including discretionary exemptions, and discussed
the committee’s proposed amendments to the New York Franchise Act
and its accompanying regulations to make the Act more business friendly
and consistent with the Federal Franchise Rule, which was amended in
2008.
Committee Chair David W. Oppenheim and member Andre R. Jaglom took
part in a panel discussion in Buffalo, New York at the Ontario-New York
Legal Summit, a joint two-day CLE program sponsored by the New York
State Bar Association and the Ontario Bar Association. The session
focused on structuring franchise systems and alternative distribution
models in the United States and Canada.
-- David W. Oppenheim, Chair
Winter 2011 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise Distribution and Licensing Law Committee holds meetings
for its members and most recently presented an educational session at
the Business Law Section’s Fall Meeting in Cooperstown. The
committee continues to advance its proposal to amend New York’s
franchise statutes that now cause almost universal confusion among those
affected by their terms (including the surprises inherent in even
determining if those terms apply to them). The amendments will clarify
which persons, entities, and activities fall within their scope, to
conform those statutes’ terms and provisions with Federal Trade
Commission rules, uniform franchise offering requirements, and current
usages of trade.
—David W. Oppenheim, Chair
Summer 2011 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise, Distribution and Licensing Law Committee has been very
active. It continues to pursue changes to the New York Franchise Sales
Act and its accompanying Regulations in order to make the Act more
business friendly and consistent with the Federal Franchise Rule which
was amended in 2008. The last Committee meeting was held in January and
featured a presentation by Christine Harris and Edith Wiseman of
Frandata. Ms. Harris spoke to the Committee members about the 2011
changes to the SBA Franchise Registry Guidelines and Procedures and Ms.
Wiseman discussed Frandata’s October 2010 Economic Forecast for
Franchising in 2011 and beyond. Approximately 20 Committee members
attended the meeting. The Committee is planning an “Introduction
to Franchising” CLE Program for the Fall.
—David W. Oppenheim, Chair
Winter 2010 NY Business law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise, Distribution and Licensing Law Committee had a very
busy summer. In June, the Committee co-sponsored the Fundamentals of
Franchising Program, a full-day CLE program held at the Affinia
Manhattan. I was the Chair for the program, and it included
presentations by Committee members Julie Lusthaus, Craig Tractenberg and
me. The last Committee Meeting was held on July 14, and it was attended
by approximately 20 members. The meeting featured a presentation from
Nonie Manion (Director of Tax Audits) and Brian Haas (Director of Desk
Audit Operations) from the New York Department of Taxation and Finance.
Our presenters led a discussion about the new franchisor reporting law
which requires franchisors to fi le semi-annual Information Reports
concerning purchases and sales for each franchisor’s New
York-based franchisees. Our presenters discussed which franchisors are
required to fi le, the information that must be included in each fi
ling, key fi ling deadlines, how the Department of Taxation and Finance
reviews and acts on the information that it receives from franchisors
and the penalties for non-compliance.
—David W. Oppenheim, Chair
Summer 2010 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise, Distribution and Licensing Law Committee hit the
ground running in 2010. We met as a Committee on January 27, 2010. The
meeting was attended by approximately 20 members. The meeting featured a
presentation from Bruce Schaeffer of Franchise Valuations Ltd. in New
York City, regarding recent tax law developments affecting franchising
in New York and across the nation. In addition, the Committee also
discussed the status of its Report (the “Committee’s
Report”) concerning proposed changes to the New York Franchise Act
to make it more consistent with both the recently amended federal FTC
Franchise Rule and the franchise laws and regulations in the thirteen
other states that regulate the offer and sale of franchises. The
Committee’s Report recommends wholesale changes to the New York
Franchise Act which was enacted in 1981.
On January 28, 2010, Tom Pitegoff (immediate past chair of the
Committee) and I presented the Committee’s Report to the Executive
Committee of the New York State Bar Association. Following the
presentation, the Executive Committee of the New York State Bar approved
the Committee’s Report and passed a resolution recommending
passage of the amendments to the NY Franchise Act to take into account
the FTC’s revised trade regulation rule on franchising. Given the
New York Attorney General’s statutory role in administering and
overseeing the New York Franchise Act, the New York State Bar and the
Committee have been working closely with the Attorney General’s
Office to obtain its support for the changes recommended by the
Committee in the Committee’s Report.
—David W. Oppenheim, Chair
Fall 2009 NY Business Law Journal
Franchise, Distribution and Licensing Committee
In a meeting on April 28, 2009, the Franchise, Distribution and
Licensing Committee appointed a legislative subcommittee to develop and
recommend changes to the New York Franchise Act and regulations. The
subcommittee issued its report in November 2009, together with
comprehensive proposed changes in the Act and regulations. The full
committee approved this report and proposed changes.
The proposed changes are necessary in light of the Federal Trade
Commission’s 2008 trade regulation rule on franchising, which
preempts a large portion of the New York Franchise Act. The Subcommittee
drafted revisions to remove and revise the preempted provisions and made
a number of other revisions intended to improve the legal environment
for franchising in the state. These changes would align the scope of
coverage of New York franchise law more closely with the franchise laws
of other states, eliminating traps for the unwary and making New York a
friendlier place to do business.
Specifically, the proposed Act and regulations together would
accomplish the following improvements, among others:
- conform the required contents of a franchise disclosure document to
the requirements of the amended FTC Rule;
- conform the registration and disclosure procedures more closely to
the requirements of the amended FTC Rule;
- conform the definition of a franchise more closely to federal law
and to the franchise laws of other states; and
- add exemptions to conform to those of the amended FTC Rule and the
laws of other states, including offers and sales:
– of franchises outside the U.S.;
– of single master franchises within the state;
– that require an initial investment of at least one million
dollars;
– to franchisees that have a net worth of at least five million
dollars; and
– to former franchisor insiders.
The subcommittee members are: Thomas M. Pitegoff (Chair), Andre R.
Jaglom, David J. Kaufmann, Harold L. Kestenbaum, David W. Oppenheim and
Richard L. Rosen.
For copies of the report and proposed changes in the Act and
regulations, contact the Committee Chair at pitegoff@pitlaw.com.
—Thomas M. Pitegoff, Chair
Spring 2009 NY Business Law Journal
Franchise, Distribution and Licensing Committee
The Franchise,
Distribution and Licensing Committee held a meeting in January 2009. The
topic was franchise legislation. David J. Kaufmann presented to the
committee a proposal he had sent to Joseph Punturo, Franchise Section
Chief in the Investor Protection Bureau of the New York State Attorney
General’s Office. The proposal was a detailed description of the
ways in which the new Federal Trade Commission’s trade regulation
rule on franchising requires or suggests changes in the New York
Franchise Act (NYFA) and regulations. This amounted to the first step
toward a possible comprehensive revision of the NYFA.
The committee also
discussed Assembly Bill A03589 (January 27, 2009), introduced by
Assemblyman Adam T. Bradley. This bill, which is the same as Assembly
Bill A10963, introduced by Assemblyman Bradley in 2008, addresses two
specific issues. It would bring the definition of a franchise in line
with the definitions in other states, and it would limit the
extraterritorial application of the NYFA.
Thomas Pitegoff,
the chair of this committee, proposed that the committee endorse A03589.
Mr. Kaufmann stated his opinion that the bill would not succeed if it
does not have the endorsement of the Attorney General’s Office.
Although Assemblyman Bradley’s staff had consulted with the
Attorney General’s Office in preparing the bill, the Attorney
General’s Office had not taken a formal position on the bill. At
the suggestion of Craig Tractenberg, the committee decided that the best
approach would be to make a formal request in writing to the Attorney
General’s Office to comment on the bill before the committee takes
any action. After the meeting, Mr. Pitegoff sent this request to the
Attorney General’s Office. As of the time that this committee
report was written, the Attorney General’s Office had not
responded.
The committee
welcomes all comments on proposed legislation or any other topic within
the scope of the committee’s mandate, including suggestions for
future presentations and programs. Contact the Committee Chair at
pitegoff@pitlaw.com.
—Thomas M.
Pitegoff, Chair
Fall 2008 NY Business Law Journal
Franchise, Distribution and Licensing Law Committee
The Franchise, Distribution and Licensing Law Committee held a
meeting in May 2008 with a presentation by Craig R. Tractenberg on the
subject of “Bankruptcy Issues and Strategies in
Franchising.”
Attendees also discussed New York State Assembly Bill A10963,
introduced by Assemblyman Adam Bradley on May 8, 2008, shortly before
the legislative session ended. The Legislature did not act on the bill
in its 2008 session, but Mr. Bradley’s staff has indicated that he
intends to reintroduce the bill in the next legislative session, which
begins in January 2009. Thomas Pitegoff, the Chair of this Committee and
a resident in Mr. Bradley’s election district, assisted Mr.
Bradley’s staff in preparing this bill.
The bill would conform the definition of a “franchise” in
New York more closely to the definitions used by the Federal Trade
Commission (FTC) and other states. It would add the concept of a
“business opportunity,” consistent with the FTC approach. It
would exempt franchise sales by New York franchisors to franchisees
outside of the state, bringing New York law in line with the approach
taken by other states. Finally, the bill would exempt the grant of
master franchise rights to a single company in New York.
The coverage of the current franchise law in New York is so broad
that it is often a trap for the unwary. The broad scope of the law
discourages companies from doing business in New York and creates
uncertainties that make compliance difficult.
These changes would improve the environment for business in the
state. They would also remove barriers to international business in New
York and enhance New York’s reputation as an international center
of business. At the same time, the changes would not eliminate the
private right of action by aggrieved franchisees, and they would
preserve the authority of the Attorney General’s Office to
prosecute franchise fraud.
The Committee welcomes comments on this bill. The Committee also
welcomes suggestions for future presentations and programs. Contact the
Committee Chair at pitegoff@pitlaw.com.
—Thomas M. Pitegoff, Chair
Spring 2008 NY Business Law Journal
Franchise,
Distribution and Licensing Committee
The Franchise, Distribution and Licensing Committee has held three
successful events in recent months.
In February, we held a half-day CLE program called “Franchise
Law in New York.” The purpose of the program was to introduce
franchise law to lawyers who do not practice in this field on a regular
basis, those who are new to franchising and those seeking an overview of
franchise law and the new FTC disclosure requirements.
Speakers included committee members David Oppenheim, Harold Kestenbaum,
Richard Rosen and myself, as well as Joseph Punturo, the Assistant
Attorney General and Franchise Section Chief in the Investor Protection
Bureau of the NYS Attorney General’s Office. Topics included The
New FTC Rule, Franchise Law in New York, The Inadvertent Franchisor,
Structuring the Franchise System and Enforcing System Standards.
In January the Committee held a meeting in conjunction with the
Business Law Section’s Annual Meeting. The topic of the committee
meeting was “The State of Franchising—2008 Economic Outlook
and Trends that Affect Franchising.” The speaker was Darrell
Johnson, the President and Chief Executive Officer of FRANdata.
At the Section Fall Meeting in October 2007, we held a meeting on the
topic “Lost Profits and Lost Business Value in Franchise
Disputes.” The speaker was committee member Bruce Schaeffer,
co-author of Commerce Clearing House’s book entitled Franchise
Regulation and Damages.
The Committee welcomes all suggestions from members and inquiries
from potential new members. Contact the Committee Chair at
pitegoff@pitlaw.com .
—Thomas M. Pitegoff, Committee Chair
Fall 2007 NY Business Law Journal
Franchise, Distribution and Licensing Committee
In its last two meetings, the Franchise, Distribution and Licensing
Committee was privileged to hear presentations by and to have roundtable
discussions with university professors who authored recent books on the
economic and business aspects of franchising.
The topic of the May meeting was “The Economics of
Franchising.” The speaker was Francine Lafontaine, Professor of
Business Economics at the University of Michigan and co-author of the
book The Economics of Franchising (Cambridge University Press 2005) and
of the article “Franchises as a Business Model” in the ABA
Franchise Law Journal (Fall 2006). Professor Lafontaine discussed the
pros and cons of franchising, the success rates of franchise companies
over the years, the size of franchising in the U.S. economy, and related
subjects.
The topic of the June meeting was “Using Franchising to Drive
the Growth and Profits of a Business.” The speaker was Scott A.
Shane, Professor of Economics at Case Western Reserve University and
author of the book From Ice Cream to the Internet: Using Franchising to
Drive the Growth and Profits of Your Company (Prentice Hall 2005).
Professor Shane identified the major issues a company should consider in
deciding whether or not to grow by franchising, and, if so, how to
design a successful franchise system.
The committee intends to hold future meetings with presentations by
committee members and others. We are also planning a CLE program to
introduce franchising to non-franchise lawyers. We welcome all
suggestions from members and inquiries from potential new members.
Contact the Committee Chair at pitegoff@pitlaw.com.
—Thomas M. Pitegoff, Chair
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