Franchise Review

   Quick access to capital Quick expansion Degree of control

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Federal Law  Register: NO o Nothing has to be filed with the FTC  Disclosure document (FDD) that contains the language that they require Wont ask specifics of a case  Will tell you why you’re referencing it  Just know the concepts that were in it o What did it stand for, what was its purpose, why was it in the class, etc.  Significant control, federal rules o Quist o Continental: KNOW THIS SHIT The court found that yes, it should have been a franchise, it wasn’t but lets just look at the contract, was there harm  degree of sophistication o Kim: No, you aren’t sophisticated; you needed more protection and you didn’t get it o Distinctions between brazil, mexico, Canada and US  What is unique to the US  Dual federal and state law here A little bit of business formation  o Most of these are corporations o If theyre partnerships theyre LLPs Look at     your written assignment What are some of the things you need to disclose Appendix A FTC Rule Elements that create a franchise: know these

closed it after the indictment. Guarantee  State level: you might Class 6  DD Case: They tried to cancel his franchise for tax fraud: fact pattern a conduct by DD which is inconsistent with the final action. they can cancel the relationship . they granted him an additional store.  o Fed: sophistication o State: mkting plan. and then he got convicted and they closed him down o Could go either way based on franchisor conduct o But court says no. could they supply you enough of the product. or community of interest Franchise fee o Not always there o Could be imputed  based on trxns or other items When does the franchise fee have to be paid? o Timing constraints  State law: No  Fed law: six months  How much do you need to pay? FTC Cases:  Examples of taking a business arrangement and the FTC seeking an enforcement action  Broad strokes: why did the FTC act? o IMall: not clear that the business model worked. he opened up another one. then his conviction came down. expectations of the business problem  Disclosure: o Who has the disclosure requirements o When is it required  Nothing at the federal level  But if you disclose there are certain materiality requirements  Estimate vs.

changing owners. whether 84 law would apply to a prior agreement. what are some of the differences Marine supply:  Duty to mitigate  Failure to look at other businesses Southland:  Arbitration  SC: FAA trumps state law. was there a material change in the contract o An amendment or alteration to the contract can be sufficient to get out from the impairment of contract aspect of constitutional law (wont take a whole brand new contract). notice to get caught up on bills. series of breaches. contract of two different time periods. court allowed it to proceed General Aviation/Cesna: issue: the notion of retroactivity. states are not allowed to forbid arbitration in their state law of these relationships . heavily influenced by state law in WA. adding new terms to the agreement Contracts of a limited duration  Week 7: Great American Chocolate Chip Cookie Company   Contract rights Cookies without the right batter o Issue of value o Dissent: how critical could this be  How well of an advocate you are of putting forth the idea of a reliable replicated product no matter what store you buy it at Seaway:  Contract or a franchise. distinction between this  Changing names. the parties did not act in good faith o Multiple stores.  Southland: Nature of the relationship.

do some research on that industry Marketing Practices Act: o Court interprets this statute broadly  Paying rent that wasn’t specifically called out in the statute as an element regulated. if it will impede arbitration clause Session 8:  O’Connor: fed arbitration act should apply in federal courts only o It wasn’t intended to apply to state courts  a procedural rule not a rule of substances o Majority does not concur.o You cant provide rights or duties under the K theory. so not included What if a statute doesn’t list as a grounds to terminate the death of the owner o Depends on if the statute has rights of inheritance built in (especially in industry specific) o Lanham v. but paying rent goes to the economics of the relationship and thus the income and profits Farm and Industrial Equipment Dealers o Literally interpreted o Did Toro lawn mowers constitute farm equipment and therefore were covered or not  Household lawn equipment isn’t in the case. Amoco Oil: death of the owner/franchisee is sufficient grounds to terminate  Most franchise agreements are considered personal services agreements We haven’t talked about a statute for a particular product o But we have talked about specific classes of products    Week 9 . it is not commercial so it is out  Not spoken to. this is a dissenting view  This becomes a smaller minority in other cases  There are other statutes that regulate other industries  o Caution.

what was the context.  Dealer stuff Federal law and the state law. where does trade dress fall in the litany of intellectual property  More akin to the elements of Trademark than to the other two  Pecos: trade dress as a body of law. why did the state law become enacted. what are their relationships to one another Week 10:  Handout of the TM factors (8)  Two Pecos  Mcdonalds o Don’t study in great depth o What was the essence of the court’s ruling (just use the headnotes)  What creates a trade mark and what is trade dress. but as a subset of TM  International Arena: o International rights come from local law of that country Week 11:  Anti trust o Some of this is still developing o Can a TM and the goods be considered two separate products: YES (if you’re a seller of multiple products)  Can they be considered one product: YES (Baskin Robins) o Tying arrangement  When you separate from parts and product and servicing you can do the tying shit (Kodak)  Servicing a product could be illegally tied to the sale of the product itself and therefore service can be an independent product that you cannot tie .

as to the conduct of other corporations No decisions were made. it was associations through the TM   Ostensible liability because they only had to rely on national advertising   . Caveat here: what business trxn can you tie legally and which can you not  Warranty service: paid by the TM holder  Customer pay service: paid by the customer (there is a greater relief that the customer should be able to freely choose the marketplace that they buy the service in) Week 12  Dealer law can be applied to nonprofits  Council for GS is still pissed Week 13:  Remedies  Vicarious liability o Relationship of the parties o Scope of liability o How does the concept interact with the concept of a franchisor/franchisee relationship  Runs afoul at one level  you’re trying to accomplish by using franchisees instead of company owned stores is limited liability Individual is beaten up failing to take security precautions  More like negligence.

4/16/2013 3:05:00 PM .

4/16/2013 3:05:00 PM .

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