Changes to Ohio’s business opportunities law became effective September 28, 2012. Senate Bill No. 196 broadens the definition of “business opportunity plan” to include plans purchased with an initial payment up to $100,000, as opposed to the previous limit of $50,000. In addition, the bill amends various other provisions of the business opportunity law, including those relating to the cancellation of agreements, compliance with trade regulation rules, and disclosure requirements.

Applying Connecticut law, a federal district court upheld the validity of an arbitration clause in an investment advisor franchisee’s arbitration agreement despite the franchisee’s claims of economic duress and unequal bargaining power. As noted by the court, in order to demonstrate economic duress under Connecticut law, a plaintiff must prove: (1) a wrongful act or threat; (2) that such act or threat left the victim with no reasonable alternative; (3) that the victim acceded to this threat; and (4) that the resulting transaction was unfair to the victim. The franchisee had alleged that the terms of the franchise agreement were… Read more

A federal district court ruled that a forklift dealer’s relationship with its manufacturer constituted a “franchise” under the meaning of the Missouri Merchandising Practices Act (the “MMPA”), and that the manufacturer had violated the MMPA by failing to give the dealer only 22 days’ notice of termination, instead of the statutorily mandated 90 days’ notice. In arriving at its decision, the court noted that a written agreement between the dealer and manufacturer granted the dealer a “nonexclusive privilege to identify itself as an Authorized Dealer, and to display, in the conduct of its dealership operations, the trademarks and service marks… Read more

The state of Washington has updated its disclosure requirements under the Franchise Investment Protection Act to better align with the Federal Trade Commission’s Franchise Rule. Senate Bill No. 6172 gives franchisors 14 calendar days prior to the signing date to provide franchisees with disclosure documents; the old rule gave only 10 business days. The law further mandates that franchisors wait 7 calendar days after unilaterally amending an agreement before signing.

The FTC recently announced that dollar thresholds for various exemptions have increased, as contemplated under the 2008 Franchise Rule amendments. The “initial required payment” threshold increased from $500 to $540; the “large investment exemption” threshold increased from $1,000,000 to $1,084,900; and the “large franchisee exemption” threshold increased from $5,000,000 to $5,424,500. These changes were announced on June 13, 2012, and go into effect on July 1, 2012.

The Canadian province of Manitoba recently passed The Franchises Act, requiring certain disclosure documents from franchisors prior to granting franchises. At least 14 days before executing a franchise agreement, the franchisor must provide the prospective franchisee with risk warnings, information about the franchisor, earnings projections (where they are provided), and financial statements (for smaller franchisors). Manitoba’s new law goes into effect October 1, 2012, and joins the Canadian provinces of Ontario, Alberta, Prince Edward Island, and New Brunswick, which already require pre-franchise agreement disclosure. The full text of the bill can be found here.

A federal district court in Washington held that Domino’s Pizza, Inc. could not be held liable for its franchisees’ violations of Washington’s prohibition against automatic dialing and announcing devices. The relevant provisions of the Washington Automatic Dialing and Answering Devices Act (“WADAD”) prohibit the use of an automatic dialing and announcing device (“ADAD”) for purposes of “commercial solicitation,” defined as the “unsolicited initiation of a telephone conversation” for the purpose of encouraging sales. The plaintiffs contended that (i) because Domino’s introduced its franchisees to an automated calling service, (ii) because the Domino’s software platform was used to make the automated… Read more

Senate Bill No. 68 amends Utah’s motor vehicle dealer law to prohibit a franchisor from: 1) coercing or requiring a franchisee to establish prices at which the franchisee is required to sell certain products or services; 2) coercing or requiring a franchisee to construct a new dealer facility or materially alter or remodel an existing dealer facility under certain circumstances; 3) requiring a franchisee to purchase certain goods or services from a specified vendor under certain circumstances; and 4) coercing or requiring a franchisee to lease a sign or other franchisor image element from the franchisor or affiliate without providing… Read more

A new law in Utah increases the dollar threshold at which assisted marketing plans become subject to the state’s Business Opportunity Disclosure Act. The threshold amount has been raised from $300 to $500. House Bill No. 78 became effective May 8, 2012.

House Bill No. 548, approved on May 1, 2012, makes Georgia the first state to adopt legislation that prohibits a franchisee from being considered an employee of its franchisor. This new law protects franchisors from liability for workers’ compensation claims made by their franchisees, but it is unclear whether the law would extend to other claims, such as tort liability. The law goes into effect July 1, 2012.