Fair Franchise Practices Bill: Unlawful Sales Practices

(UnhappyFranchisee.Com) Proposed PA House Bill 1620 (Fair Franchise Practices Bill) prohibits franchisors from misrepresenting “(i) the profitability of a franchise opportunity; (ii) the rate of success of franchises or franchisees associated with a franchise opportunity; (iii) the expected market value of the franchise; (iv) the equity the franchisee will accumulate in the franchised business; or (v) the rate of success of franchises generally.”

It states:

§ 913. Unlawful sales practices.

(a) Franchises.–A person may not do any of the following in connection with the advertising, offering, sale or other promotion of a franchise:

(1) Employ any device, scheme or artifice to defraud.

(2) Engage in any act, practice, course of business or pattern of conduct which operates or is intended to operate as a fraud or deceit on a person.

(3) Make an untrue statement of a material fact, omit a material fact or omit a material fact necessary in order to make the statement, in light of the circumstances under which it is made, not misleading.

(4) Represent or imply that a franchise has been endorsed, recommended or approved by a Federal or state agency or officer.

(b) Disclosure.–A person may not do any of the following in connection with a presale franchise disclosure document required by statute or regulation:

(1) Make an untrue statement of material fact, omit a material fact or omit a material fact necessary to make a statement, in light of the circumstances under which it is made, not misleading.

(2) Fail to furnish a prospective franchisee with all information required to be disclosed at the time and in the manner required by regulation of the department or other applicable law.

(3) Make a representation to a prospective franchisee which is inconsistent with or contradicts information provided to the prospective franchisee in a required disclosure.

(4) Make a statement of fact which has the purpose or effect of misrepresenting:

(i) the profitability of a franchise opportunity;

(ii) the rate of success of franchises or franchisees associated with a franchise opportunity;

(iii) the expected market value of the franchise;

(iv) the equity the franchisee will accumulate in the franchised business; or

(v) the rate of success of franchises generally.

(c) Burden of proof.–In a criminal action under this section it shall be an affirmative defense that:

(1) the franchisor’s statement or representation is accurate and not misleading; and

(2) there was a reasonable basis in fact for the franchisor’s statement or representation at the time it was made.

What do you think of the Unlawful Sales Practices provision of the proposed PA House Bill 1620 (Fair Franchise Practices Bill)?

Do you believe that making this provision law will be good for franchising?

Why or why not?  Please share a comment below.

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TAGS:  Unlawful Franchise Sales Practices, franchise legislation, PA House Bill 1620, PA Responsible Franchise Practices Bill, Fair Franchising Legislation, Franchise laws, Pennsylvania State Rep. Peter Daley

One thought on “Fair Franchise Practices Bill: Unlawful Sales Practices

  • November 16, 2013 at 4:45 pm
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    I think a provision or statement should be included to cover a requirement to disclose to any potential franchisee or buyer of an existing franchisee the income statements and cash flows for the prior three years. Something needs to be included to prevent ‘churning’ – selling ‘bankrupt’ territories.

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