By now you’ve probably heard that the Federal Trade Commission (“FTC”) adopted a new rule severely restricting the use of non-compete agreements in the United States. You also might have heard that a number of organizations, including the U.S. Chamber of Commerce have already challenged this rule in court. Below is a Client Alert written by several of my colleagues (Robert C. Nagle, Brian A. Berkley, or Josephine H. Wenson) respecting the details of the new rule and a recent court challenge. The TL:DR for the franchise industry is that the FTC carved out non-compete clauses between franchisor ..read more

If you attended this year’s IFA Annual Convention in Phoenix, you heard Senator Joe Manchin strongly support and defend the franchise business model in a speech. Late on Wednesday, Senator Manchin used his vote to back up the talk. Specifically, Senator Manchin was the sole Democrat to cross the aisle and vote for a Congressional Review Act (“CRA”) measure of disapproval of the National Labor Relations Board (“NLRB”) new joint employer rule. As we’ve noted, the new rule could hold franchisors liable for franchisee labor law violations if those franchisors possess or exercise the right or auth ..read more

The Securities Division of the Indiana Secretary of State issued a press release this week announcing that it filed an administrative complaint against Florida based Mac and Cheese Franchise Operations LLC and its parent company and owners (“MACFO”), the franchisor of the I Heart Mac & Cheese franchise restaurant concept.  According to the complaint, MACFO is accused of pushing an unprofitable business model and misrepresenting to prospective franchises the start-up costs to open a location.   None of the three locations in Indiana are still open and operating and the rest ..read more

Back in December 2022, we published a blog informing readers that guidance on franchise sales brokers and agents may be on the horizon.  The North American Securities Administrators Association’s (“NASAA”) Franchise and Business Opportunities Project Group told us at the 2022 ABA Forum on Franchising Annual Meeting that it was focused on evaluating a model for third party franchise seller registration.  At the time we did not have any information beyond the announcement, but it looks like the State of California is paving the way with its new proposed Senate Bill No. 919.  &nbs ..read more

A district court in Georgia recently granted a Motion for Preliminary Injunction filed by HOA Franchising, LLC’s, the franchisor of the Hooters restaurant chain (“Hooters”), against one of its former restaurant franchisees, MS Foods, LLC (“Franchisee”), but in doing so “blue-penciled” the Hooter’s post-term restrictive covenant to narrow the geographic limitations on the Franchisee.  The Franchisee was terminated by Hooters for repeated defaults, including failing to meet operational standards, failing to pay amounts due to satisfy Franchisee’s indemnification obligations under the fran ..read more

A federal district court recently granted the United States’ Motion for Default Judgment against the quick-service burger restaurant franchise concept, Burgerim Group USA, Inc. and its owner (“Burgerim”). The Federal Trade Commission (“FTC”) filed a complaint against the defendants alleging they used misleading sales practices to sell more than 1,500 franchises in violation of the FTC Franchise Rule.  The complaint arose after several states, particularly California, Indiana, Maryland and Washington, filed cease and desist orders and barred Burgerim from offering and selling franchisees ..read more

In a move welcomed by employers nationwide, a federal court judge in Texas has vacated the National Labor Relations Board’s proposed joint employer rule. Copyright: mipan / 123RF Stock Photo The decision, handed down late on March 8, 2024, by Judge J. Campbell Barker of the Eastern District of Texas, means that the more employer-friendly standard the Board implemented in the waning days of the Trump administration, which requires a showing of “immediate and direct control,” will continue to apply for the foreseeable future. Judge Barker’s decision, which called the proposed joint employer stan ..read more

A recent court case issued by a federal district court in Vermont (Provencher v. Bimbo Bakeries U.S.) emphasizes the distinction between independent contractors and employees under the Vermont Employment Practices Act (the “Act”). Wishing for an entitlement to overtime pay, certain bakery products distributors claimed, pursuant to the Act, that they should be deemed employees of a manufacturer rather than independent contractors. Despite the manufacturer’s attempt to create an independent contractor relationship between the parties through its Distribution Agreement, the Court’s decision turne ..read more

New and emerging franchise systems are often very eager to sign those first franchisees. All too often, they are willing to make concessions to get the franchisees on board, despite their franchise attorney’s recommendation against negotiating terms in the standard form of franchise agreement.  If your new franchise system client is determined to make accommodations to its first prospects, then we suggest considering the following: Draft a Clear and Concise Addendum to the Franchise Agreement.  If a franchise system client is willing to negotiate changes to the form agreements, th ..read more

In a matter of first impression, the Supreme Court of New York held that protections afforded to beer wholesalers under the New York Alcoholic Beverage Control Law (“NY ABC Law”) obligate an importer to honor a distribution agreement entered into by the prior importer of the same brand, even where there is no relationship or privity of contract between the prior importer and new importer. This case shows that alcohol importers operating in New York who succeed in distribution right should scrutinize their obligations to wholesalers before terminating or failing to renew agreements between the ..read more