Minnesota Franchise Law
Minnesota Franchise Law
Minnesota Franchise Law
The franchise business model is alive and well. As a result of the current economic situation, many individuals are looking for alternate means of employment. For some, this means the traditional job search with an ever increasing pool of candidates. For others, current economics may be a signal to try something new the dream of owning their own business. At its very essence, a franchise business model provides a framework in which to operate the business and accelerate the "start-up" time and capital that may be needed to start from "scratch". Specific legal standards identify what constitutes a franchise rather than a business opportunity.
The Minnesota Franchise Act focuses on three (3) indicia as to whether a franchise relationship exists. These indicia determine whether a business owner offering the sale of a business must follow certain regulatory steps in disclosing matters about it business before it is sold to a potential operator. These indicia are: (1) a right granted by the franchisor to the franchisee to engage in business using the franchisor's trademarks, trade name or trade dress; (2) a community of interest in the marketing of goods or service between the franchisee and the franchisor; and (3) a franchise fee paid by the franchisee to the franchisor.
The Right to Use Franchisor's Marks
Under franchise relationships, the franchisor grants to the franchisee a right to use certain trademark and service marks associated with the business. Often, this comes in a format logo, font or color scheme that identifies a franchise business. Notable examples would be fast food franchises such as the Colonel of Kentucky Fried Chicken, or the Golden Arches of McDonald's. Without the grant of the rights to use these marks, any business operator using them would be in violation of trademark law on a state and federal level.
Community of Interest
The community of interest element requires that there be some type of ongoing business relationship between the franchisor and the franchisee. For example, the franchisor could set the way orders are taken or how financial data is submitted in the management of the franchise. Generally speaking, the community of interest requirement is more easily established by showing a financial relationship between the franchisor and franchisee often in the form of a royalty payment or through joint marketing efforts.
Franchise Fee
The meaning of a franchise fee is broadly construed by Minnesota Courts. A royalty payment made for the use of a franchisor's system or an initial fee for the right to enter into a business are often easily identified as franchise fees. In addition, franchise fees can also be fees for training or any charges for materials in running a business. Minnesota law does provide a more broad scope of transactions entitled to franchise law protection than other states and has even provided protection for some distributorship relationships. As such, businesses considering offering a "business opportunity" in Minnesota are well advised to go through the formal process of preparing a Uniform Franchise Offering Circular ("UFOC") and make appropriate filings before engaging in businesses that could possibly be classified as a franchise.
Disclosure Requirements
If a business opportunity is a franchise, the franchisor makes certain filings with the Minnesota Department of Commerce. The filing describes the business of the franchise as well as standardized disclaimer requirements set forth by the North American Securities Administrators Association as adopted by Minnesota administrative rules. These rules help assist potential buyers in determining whether or not the franchise is a viable opportunity and encourage fairness in disclosure to avoid fraud on the part of franchisors. Making the appropriate filings is essential for the franchisor. Failure to file the franchise may result in the remedy of recession could allow the franchisee to recover its costs of entering in to the franchise, any damages sustained and attorneys' fees and costs.
Franchisors must make filings with the Department of Commerce in a manner so as not to be false, fraudulent, or deceptive. These filings must also not include any untrue statement of material fact or fail to state a fact required to be in the filing. Great care must be exercised in reviewing the UFOC, as they rarely answer every meaningful question, particularly in the areas of earnings. Historical data with respect to earnings and other franchises in the franchisor system must be tempered as there are a number of factors that influence franchise success. Perhaps the best due diligence that can be performed by a potential franchise owner is to contact other franchisees in the system to discuss their experience with the franchisor and to engage the services of a franchise coach. Cheap But Amazing Greeting Cards For The Holidays Washington Dc Krav Maga - Maryland Krav Maga Have A Warm Golf Travel in Australia Royal Trains In India- Cream Of Indian Tourism Singapore Holidays Halloween Party Bags Do You Want to Have a Fun, Safe and Happy Halloween? Then I Can Help Are You Addicted To Celebrity Gossip? Rajasthan Tourism Top Destinations In Rajasthan Backpacker Travel Insurance- Shapes Your Trip A GLORIOUS END IN SOUTH AFRICA Things to do in Sydney Australia Luxury Beach Resorts Maximizing Your Beach Holiday Fun