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Franchise Law Basics in Florida

Franchises can be lucrative and attractive business opportunities for both the franchisor (the founder of the original business) and the franchisee (the owner of the business that is licensing rights to use the franchise for a new business location). It is important to keep track of the relevant franchise laws of the state, or states, in which franchisors and franchisees are doing business as the franchise laws can vary significantly across borders.

Florida state laws lay out key rights and responsibilities of franchisors and franchisees. These laws lay out the expectations for both parties and back up the common law (which is the traditional law derived from historical legal decisions) to provide protections for individual franchisees and franchisors.

Franchisee Rights

Under the state law, franchisors cannot engage in unfair business practices such as capricious, bad faith activities, or unconscionable activities that damage the other parties (particularly the franchisees) or the public at large.

Also, it is not permissible under Florida law for franchisors or other suppliers to force a franchisee to order or accept merchandise or equipment under duress or to buy products that contain unwanted features, accessories, or other additional equipment that is unwanted.

Alternatively, it is also illegal for franchisors to improperly withhold supplies or other necessary products from franchisees in such a way that would harm the financial well-being of the franchisee.

Contracts between Franchisees and Franchisors

Generally, a franchisee and a franchisor must follow strict guidelines as laid out in a franchise contract. The agreement will lay out the requirements for both parties. The agreement will explain how much advertising must be provided by either party, the various investments each party must make, as well as explain the regional franchise rights for the franchisee.

Employees at Franchises

Franchisees have traditionally been considered the direct employer of employees working at each individual location. However, the Obama Administration has asserted that such employees may be employees of the franchisor. The National Labor Relations Board recently held that the main McDonald’s company would be a joint employer for purposes of labor disputes. Therefore, if any unfair labor practices occurred during a labor strike, the franchisee and franchisor would be liable for such actions.

However, several Federal courts have not agreed with this interpretation. Several federal courts across the country, and the California Supreme Court, have rejected the interpretation of the National Labor Relations Board. However, the California court was split, with only four of the seven judges deciding that the franchisor should not be held liable for labor issues between a franchisee and employees. And three judges actually would permit a jury to determine, potentially, that the franchisor should be held liable. Since the law may be evolving in this area, it may be more important than ever for businesses involved in franchise relationships contact knowledgeable attorneys for advice.

Contact Experienced West Palm Beach Business Law Attorneys

For questions or concerns about the nature of a franchise agreement or whether a franchisor or franchisee is in violation of the agreement or state law, contact the attorneys at the Pike & Lustig, LLP now for assistance.

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