1. Accidental Franchising
March 7, 2019
Marcellus Chase

2. Hypothetical Scenario
Is This A Franchise?
Hypothetical Scenario

3. Why Does It Matter? Registration & Disclosure Requirements
Ongoing Relationship Obligations
Termination Restrictions

4. Federal: The FTC Rule TM License Significant Control or Assistance
Payment
16 CFR §436.1(h)

5. Federal: Exemptions & Exclusions
Fractional Franchise
Minimum Payment
Others

6. State Disclosure / Registration Laws
15 States:
Minnesota
California
New York
Florida
North Dakota
Hawaii
Rhode Island
Illinois
South Dakota
Indiana
Virginia
Maryland
Washington
Michigan
Wisconsin

7. State Franchise Relationship/Termination Laws
Arkansas
Minnesota
California
Mississippi
Connecticut
Missouri
Delaware
Nebraska
District of Columbia
New Jersey
Hawaii
Tennessee
Idaho
Virginia
Maryland
Washington
Michigan
Wisconsin

8. Other State Laws
Business Opportunity Laws
Industry-Specific Laws

9. Federal: The FTC Rule TM License Significant Control or Assistance
Payment

10. Naked License vs. Franchise
No Quality Controls
Significant Control over Manner or Method of Operations
Significant Assistance to the Business Operations

11. Significant Control or Assistance
Degree of Control?
Site/location approval
Site design or appearance requirements
Hours of operation
Production techniques
Accounting practices
Personnel policies and procedures
Promotional campaigns (requiring Franchisee participation or financial contribution)
Restrictions on customers
Geographic limitations
Degree of Assistance?
Training programs
Accounting systems/software
Management, marketing, or personnel advice
Assistance in selecting site locations
Providing or assisting in setting up hardware, software, or website
Operations manual
Licensing other IP: patented (or non-patented) systems, software copyrights, or specialized know-how

12. Revisit Hypothetical Scenario
Is This A Franchise?
Revisit Hypothetical Scenario

13. Is This A Franchise?
Examples

14. Accidental Franchising
March 7, 2019
Marcellus Chase