New York State Franchise Rules: Sales Agent Disclosures
The use of franchise "sales agents" offers franchisors the ability to implement cost effective and productive franchise sales programs. However, after implementing and structuring a "sales agent" program franchisors must be aware of the additional disclosure obligations that must be satisfied for sales agents. In the State of New York franchisors are required to file a "Sales Agent Disclosure" form with the New York State Attorney General. Although this disclosure is relatively simple to prepare in many instances (far too many) it is overlooked (i.e. not filed) by franchisors, resulting in unnecessary "litigation risk".
The Sales Agent Disclosure Form (Form E) requires a franchisor to list the following information according to the State of New York:
All the persons who will offer or sell franchises in the state of New York along with their business address and telephone number, home address and telephone number, present employer, present title, social security number, birthday, and employment history from the past five years;
State whether any person you are requesting to be a sales agent has any administrative, civil or criminal action pending alleging a violation of franchise or securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or any comparable allegations;
State whether any of the sales agents listed have been convicted of a felony or pleaded nolo contendere to a felony charge or been held liable in a civil action by final judgment if the felony or civil action involved a violation or franchise or securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable violations of law;
State if any of the sales agents have entered into or been named in a consent judgment, decree, order or assurance under federal or state franchise, securities, anti-trust, monopoly, trade practice or trade regulations law;
State whether any of the sales agents have been subject to an order or national securities association or national securities exchange as defined in the Securities and Exchange Act of 1934 suspending or expelling the person from membership in the association or exchange;
For additional information concerning franchising a business or for information on further refining your franchise system and establishing a compliance program request a complimentary copy or "The Revised Franchise Formula: A Guide to Franchising Your Business in the New Economy" by franchise lawyer Charles N. Internicola or contact Mr. Internicola at (800) 976-4904.
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