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Cases, news, issues and legal opinions impacting franchise law

Coffee Beanery Franchisees Testify for Arbitration Fairness Act

Williams: "Our Dream Was Trampled Upon by Binding Mandatory Arbitration"

WASHINGTON, D.C. (Blue MauMau) - Last Thursday, Deborah Williams and Richard Welshan, franchisees of Coffee Beanery, went before the House Subcommittee to tell their story of how mandatory arbitration in franchising contributed greatly to their demise. In Deborah Williams' testimony she stated, "I am 54, bankrupt and on the verge of being homeless, all because of a binding mandatory arbitration clause." Williams and Welshans are supporting the “Arbitration Fairness Act of 2007, Bill  H.R. 3010, sponsored by Rep. Hank Johnson, D-GA., which would ban pre-dispute mandatory binding arbitration, in which consumers. . . give up their rights to sue and agree to enter arbitration instead." U.S. Reps. Elijah Cummings, D-Baltimore, and John Sarbanes, D-Towson, are co-sponsoring the bill.

Although franchisees do not come under the "consumer" label, some advocates for the bill are adding franchising to their message. Paul Bland, staff attorney for Public Justice, said in his testimony, "H.R. 3010 would ban the use of pre-dispute binding mandatory arbitration in consumer, employment, franchise and medical contracts." His article, Yesterday's Hearing on Arbitration, for Public Citizen gives highlights and testimonies of the hearing. 

Brokers Under the New Rule

The View of a Litigator on the FTC's New Deletion of Broker Disclosure by Franchisors

Every time a disclosure rule change is made/ contemplated/ suggested, there is a hue and cry from franchisors that the disclosure process is already too cumbersome and another hue and cry from the franchisee community that many more specifics are needed to protect the public from deception and abuse. Having been on both sides of just about every franchise issue for lo these many years, I am becoming somewhat jaundiced concerning the fine tuning of “rules”.

Disclosure requirements are beneficial for investment worthy franchisors. They actually help sell franchises. Disclosure requirements hurt fewer “bad” franchisors than people think, because the miscreants don’t make effective disclosure of the factors that make them bad investments, no matter what the rules say.

I have been involved in many cases where outside sales facilities were used by franchise companies prior to this new rule that disclosure about brokers is no longer critical. Those experiences have made me very cynical.

A Lawyer's Candid Discussion of Legal Challenges Franchise Operators Face

At the ABA Forum: A Discussion of Franchise Ownership in America with One of the Country's Premier Franchise Attorneys, Andy Selden

Reporter’s note: I sat down for a one-on-one interview with one Andrew Selden at the 30th Annual American Bar Association’s Forum on Franchising in Phoenix, Arizona. Selden was the chair of the ABA’s Forum on Franchising from 1985 – 1989. He is a shareholder of Briggs and Morgan, P.A., out of Minneapolis. To improve clarity and cohesiveness, my original interview has been supplemented with information from other articles and resources concerning Mr. Selden, which I then verified with him.

Having been involved in franchise litigation for over 37 years, Selden speaks candidly on the plight of franchisees, independent franchise associations, regulation and the new FTC franchise rules.

Don: As I have attended the Forum on Franchising workshops, I’ve noticed that the discussions overwhelmingly focus on franchisor perspectives. If a franchisee were here, I think they might be overwhelmed by how much thought is going into the franchisor side of the equation in contractual law and how little to the franchisee. Am I off base in what I'm seeing?

Mr. Selden: If the franchisee figures out that he as the little guy is represented by vastly outnumbered and overworked franchisee attorneys, then attending this forum would be helpful and instructional for him (or her). Think of the legal dimensions of franchising. The other side’s lawyers wrote the contracts. They wrote it unilaterally. They didn’t negotiate it. They probably won’t negotiate it, or not very much.

If It Does Not Have Feathers, Wings, Beak and Legs ...

International Franchise Law: Australian Courts Weigh-In On What Is A Franchise

MELBOURNE, Australia (Blue MauMau) - In today’s judgment in ACCC v Kyloe Pty Ltd [2007] FCA 1522, the Federal Court in Australia examined a drink machine distribution arrangement and concluded it did not fall within the definition of ‘franchise agreement’ in clause 4 of the Australian Franchising Code of Conduct (the Code). Clause 4 (below) provides a cumulative set of criteria that must be met before an agreement may be caught under the Code.

4 Meaning of franchise agreement
(1) A franchise agreement is an agreement:
(a) that takes the form, in whole or part, of any of the following:
(i) a written agreement;
(ii) an oral agreement;
(iii) an implied agreement; and

Franchise Regulation

Regulation History