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What Constitutes An "Offer To Sell" A Franchise?

Franchise regulation and a franchisors obligation to provide a prospective franchisee with a FDD is, typically, triggered by the offer of a franchise. That is, no less than 14 days prior to "offering" the sale of a franchise, a franchisor must disclose and provide the prospective franchisee with an FDD. An offer to sell need not be "formal" and represents a very low threshold that franchisors need to be aware of. Negotiations and discussions about a franchise opportunity and/or potential (even if informal) may constitute an offer to sell and therefore subject the franchisor to regulation.

Also consider that the location of your franchise sale discussions and negotiations may trigger the franchise laws in multiple states. For example, if you communicate with a prospective franchisee located in New York about that prospective franchisees purchase and establishment of a franchise to be located in California, as a franchisor, you will have triggered both New York and California's franchise laws and you will be required to have registered your FDD in both New York and California. Even though the franchise will not be located in New York.

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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