There has been a fair amount of discussion in the franchising world recently about anti-poaching. Anti-poaching refers to provisions in franchise agreement that prohibit a franchisee from hiring the employees of the franchisor or the employees of other franchisees in the franchise system. A typical in-term covenant might read as follows:
Part 1 of this blog series addressed business issues to consider in deciding whether to franchise your business and preparations to be made before launching a franchise program. Part 2 of this blog series addressed preparation of the legal documents required under federal and state franchise law - the Franchise Agreement and the Franchise Disclosure Document ("FDD"). Part 3 of this blog series addressed state registration of franchises. This blog addresses compliance with franchise laws as a new franchisor begins offering and selling franchises. In addition to franchise disclosure and registration requirements, the federal and state franchise laws cover actions that must be taken when offering and selling franchises and actions that are prohibited in the offer and sale of franchises.
Part 1 of this blog series addressed business issues to consider in deciding whether to franchise your business and preparations to be made before launching a franchise program. Part 2 of this blog series addressed preparation of the legal documents required under federal and state franchise law - the Franchise Agreement and the Franchise Disclosure Document. This blog addresses state registration of franchises.
Part 1 of this blog series addressed business issues to consider in deciding whether to franchise your business and preparations to be made before launching a franchise program. This blog assumes that you have made the decision to franchise your business and you are ready to engage a franchise attorney to assist you with the legal compliance. The first step in legal compliance is to prepare a Franchise Agreement and the Franchise Disclosure Document required by federal and state franchise laws.
The site selection process for franchisees can be a tedious endeavor. You must find a location with the correct square footage, layout, accessibility, and demographics in the area that you and the franchisor have agreed you will establish the franchise. Once you have found a suitable location, you might be tempted to sign the lease without having an attorney review it and negotiating terms, not wanting to risk going through the search process yet again. This is a dire mistake and could negatively affect the success of your franchised business going forward.
If you are considering the purchase of a franchise, what is the value in hiring a franchise attorney? Purchasing a franchise is an extensive, and sometimes overwhelming, process that covers business, financial and legal issues. Since a franchise is typically a significant investment and long-term commitment, you are well advised to work with professional advisors along the way. So why should you hire a franchise attorney?
When we assist prospective franchisees considering the purchase of a franchise, we review the Franchise Disclosure Document and Franchise Agreement. We want you to understand your legal obligations under the Franchise Agreement and other franchise requirements before you make the decision to purchase a franchise. We will provide you with our assessment of the information disclosed in the Franchise Disclosure Document and our assessment of your rights and obligations and the franchisor's obligations to you under the Franchise Agreement by delivering to you a written memo and discussing it with you.
The Illinois Freedom to Work Act went into effect on January 1, 2017 (820 ILCS 90). The Act is said to have been passed in response to Jimmy John's requiring employees to sign non-compete agreements that restricted the employees from being employed at businesses located with 2 or 3 miles of Jimmy John's locations if the business obtained more than 10% of their revenue from the sale of menu items similar to the Jimmy John's menu items.
The U.S. Food and Drug Administration's Menu Labeling Rule, which was set to go into effect on May 5, 2017, has been delayed. The Menu Labeling Rule called for businesses in the food service industry (e.g. restaurants, grocery and convenience stores) with 20 or more locations to post calorie counts on their menu boards. This would apply to most food service franchise systems. The Rule is now set to go into effect on May 7, 2018.