Franchise and Distribution: The United States

Home of the Free. Land of the Brave.

The U.S. is also home to the world's largest economy, and easily the most highly-developed franchise market on the planet. Americans have come to equate franchise brands with quality and convenience, which means that successful franchising ensures a premium that translates to higher price points, and increased enterprise value. Everyone wins: the consumer, the franchisor, and the franchisee.

But the "Brave" part of the characterisation can't be forgotten. It applies to the foreign franchise system that chooses to enter this legally-fractured and geographically-diverse market.

The US is-by a very large margin-the most highly-regulated franchise market in the world. US franchise law is imposed upon all 50 US states, as well as all Territories and Possessions, by the Federal Trade Commission Franchise Rule. As well, many states administer tough franchise registration laws through their state securities division. Attempts to offer franchises for sale by unregistered franchisors or salespeople can and regularly do result in stiff fines and other penalties, which may include suspension of the right to offer franchises for sale in that state.

In addition to the requirement of many states that franchise offerings (and the brokers, salespeople and the franchisor's employees who are selling them) be registered, the US has a myriad of other onerous laws that affect the ability of a franchise system to conduct its business, including:

• Requirement for the pre-approval of advertising in some states.
• Use and registration of brokers and salesmen.
• State and federal trademark laws.
• Business opportunity laws.
• Unfair trade practice laws.
• Franchise relationship laws, governing issues such as the requirement for good cause to terminate a franchise, and post-term restrictive covenants.
• Anti-trust (competition) laws.

Moving Forward. We look forward to working together with you to start, expand or re-structure your system, or to solve whatever problem or seize whatever opportunity you're dealing with, anywhere. Contact Peter Dillon at 800-816-9596 (or 519-672-2121 outside of North America) or electronically at peter.dillon@siskinds.com.